Risk Analysis and Management

in Rainfed Rice Systems

S. Pandey, B.C. Barah, R.A. Villano, and S. Pal, Editors

IRRI
INTERNATIONAL RICE RESEARCH INSTITUTE
Contents

Introduction v

Units of measurement xi

Risk and rainfed rice: some conceptual and methodological issues 1

S. Pandey
Risk and rainfed rice in India: an overview 21
C. Ramasamy and K. Uma
Decomposition of income variability in rainfed areas: the case of rice 29
in eastern India
B.C. Barah
Labor use and employment pattern in rainfed rice-producing states of India 39
G.K. Chadha

Crop insurance: a policy perspective 63

P.K. Mishra

The nature and causes of changes in variability of rice

production in eastern India: a district-level analysis 73
S. Pandey and S. Pal
Growth and variability in agriculture revisited: district-level evidence of
rice production in eastern India 97
S. Pal, S. Pandey, and Abedullah
Rainfed rice and risk-coping strategies: some microeconomic
evidence from eastern Uttar Pradesh 115
S. Pandex H.N. Singh, and R.A. Villano

Risk and the value of rainfall forecast for rainfed rice in the Philippines 135
Abedullah and S. Pandey
Characterizing risk and strategies for managing risk in
flood-prone rice cultivation in Assam 143
B.C. Bhowmick, S. Pandey, R.A. Villano, and J.K. Gogoi
Risk and its management in the rainfed rice ecosystem of Bihar 157
J. Thakur
Risk and its management in rainfed rice ecosystem of West Bengal 165
N.K. Saha, S.K. Bardhan Roy, and U.S. Aich

Risk and rice production in Orissa, eastern India 173

D. Naik, S. Pandey, D. Behura, and R.A. Villano
Risk and rice technology design 187
L.J. Wade
Participants 195
Introduction
Agricultural production is an inherently risky
activity, especially in rainfed areas where
farmers have to contend with high levels of
climatic risk. Crops may suffer from drought,
submergence, or both, often in the same season.
Although climatic uncertainty is a major source
of risk, other sources of risk such as price
uncertainty can amplify the effect of climatic
risk. A better understanding of different sources
of risk is essential as strategies to overcome risk
may vary with sources of risk.
Eastern India, which comprises six states,
has approximately 20 million ha of rainfed rice.
High levels of climatic risk in these areas are
often believed to be a major constraint to
adoption of improved technologies. In the
absence of efficient crop insurance schemes,
farmers have developed mechanisms for self-
insurance against these risks. The efficiency
costs of these strategies can be substantial,
especially for poor farmers who have very few
resources to fall back on in the case of crop
failure.
An in-depth understanding of the role of risk
and risk aversion in rainfed rice systems is
needed to develop technological and policy
interventions that help reduce the cost of dealing
with risk. Although the importance of risk has
been widely recognized by researchers and
policymakers, there is a dearth of quantitative
information on the effect of risk on rice
production systems in rainfed rice environments.
In eastern India, the work has been mainly
qualitative and descriptive. Analysts have often
attempted to quantify risk at a higher level of
aggregation (district or state) rather than at the
farm level. Similarly, much of the policy
research has focused on the use of price policy
and public distribution systems in improving
food security. Overall, the study of risk and
risk-diffusing mechanisms in rainfed rice
environments has been somewhat fragmented,
with researchers from various disciplines
studying particular facets of risk.
A 3-day workshop on “Risk Analysis and
Management in Rainfed Rice Systems” was
organized jointly by the International Rice
Research Institute (IRRI) and the National
Center for Agricultural Economics and Policy
Research (NCAP), New Delhi in September
1998. The primary objective of the workshop
was to take stock of the work that has been
carried out by researchers from various
disciplines with a view to synthesizing the
findings and identifying priority themes that
need further investigation. Researchers from
within and outside India presented 17 papers.
The present volume consists mainly of the
papers presented during the workshop. However,
a few new papers not presented during the
workshop are also included due to their
relevance to the theme of this workshop.
The first paper by Pandey provides a general
overview of conceptual and empirical issues in
risk analysis in the context of rainfed rice
farming. The paper provides discussions on the
concept and measurement of risk, the effect of
risk on technology adoption, and how farmers
cope with risk through various self-insurance
strategies. The paper also analyzes technology
and risk interactions at both the farm and
aggregate level. In addition, strategies for
developing and disseminating risk-reducing
technologies are discussed. Technologies that
require a lower degree of prior commitments of
inputs, that raise income by improving other
v
 components of farming systems (not just that of
rice), and that help stabilize area (not just yield)
are seen as important for reducing risk. As such
technologies will require farmers to use
information on weather and other factors that
condition crop performance, provision of such
information is seen as an important risk-
reducing strategy. Similarly, dissemination of
such risk-reducing technologies that tend to be
somewhat information-intensive will require
reform of the extension system that is designed,
in most countries, for delivering simple
technology packages.
Ramasamy and Uma provide an overview of
risk-related literature in the context of rainfed
rice farming in India. While recognizing the
importance of climatic risk, they emphasize risks
associated with the timely supply of inputs and
with prices. The review also indicates that most
of the literature on the study of farm level risk in
rice production in India is somewhat dated.
Perhaps a rapid growth in productivity realized
through the adoption of modem varieties and
other related technologies in irrigated areas
during the Green Revolution period diverted
attention from problems facing rainfed areas.
However, with the increasing attention now
being paid to rainfed rice systems of eastern
India, interest in issues of risk and its
management has come once again to the
forefront. Ramasamy and Uma identify
important areas that require increased research
attention to develop risk-reducing interventions.
The paper by Barah shows that price
variability can be an important source of revenue
variability of rice farmers. Using the method of
variance decomposition, Barah finds that price
variability is more important than yield
variability in irrigated environments, but that the
opposite holds true in the rainfed environment.
The implication is that the design of price policy
should vary according to the environmental
conditions including basic infrastructure. Of
course, this poses the challenge of how to design
a differential price policy in an environment
where spatial economic linkages are growing
stronger. Yield-stabilizing and -enhancing
measures such as biotic and abiotic stress-
tolerant varieties and insurance against
vi
calamities are preferred policies particularly in
the poorly endowed regions.
Chada discusses the role of nonfarm rural
employment in income diversification and,
consequently, in risk management of farm
households in India. Using rural employment
data for India, the author shows that expansion
of rural nonfarm employment has helped
farmers manage risk better. In addition,
expansion of nonfarm rural industry will directly
promote economic growth by better use of
forward and backward linkages associated with
agricultural growth. Improvements in
infrastructure and agrarian reforms are seen as
important policy interventions needed to
stimulate the growth of nonfarm employment in
rural areas.
Mishra discusses the issues related to crop
insurance as a policy response for stabilization
of crop income. Although the current wisdom is
that publicly funded crop insurance programs
are financially unviable, the author finds the
total social benefit of the comprehensive crop
insurance scheme in India to be higher than the
total cost. Thus, from the social point of view,
the author shows that crop insurance programs
can be desirable, even though they may not be
financially viable without the subsidy.
Nevertheless, the author suggests that
opportunities for improving the financial
performance of crop insurance schemes should
be exploited as much as possible to improve
their financial viability. The problems of
adverse selection and moral hazard, however,
continue to erode the viability of crop insurance
schemes.
Two papers (Pandey and Pal, and Pal et al)
have focused attention on assessing the pattern
of changes in productivity and variability in
eastern India using district-level data. The
authors report a diverse pattern of change with
variability increasing in some districts,
decreasing in others, but remaining more or less
unchanged in most. Eastern Uttar Pradesh and
West Bengal are the two states where the change
in variability (defined by the CV of production)
has been stabilizing. This is attributed mainly to
the availability of supplemental irrigation that
reduced risk and encouraged farmers to adopt
yield-increasing modem varieties. Parts of
Bihar and Orissa, on the other hand, experienced
an increase in production variability. The
coefficient of variation of district-level yield was
found to be positively related to the coefficient
of rainfall and negatively related to the quantity
of fertilizer used. As the latter is an indicator of
the extent of adoption of improved technologies,
the stability consequences of the adoption of
improved technologies appear to have been
favorable in eastern India. The findings of these
two studies support the view that productivity
gains in parts of eastern India have been
achieved without increasing instability. This
indicates that growth and stability are not
necessarily incompatible goals. The expansion
of irrigation and development of rice varieties
suitable to the environment of eastern India are
likely to be the causal factors that have reduced
instability and increased growth simultaneously.
However, there is an underlying trend toward an
increasing correlation in production across
districts that, if unchecked, could have a
destabilizing effect.
The Pandey et al paper analyzes risk
management strategies using panel data from
two villages with contrasting risk profiles in
eastern Uttar Pradesh. Diversification and
maintenance of flexibility are seen as two major
strategies for reducing risk. The analysis of
panel data permitted the authors to document
changes in cropping patterns, varieties of rice
grown, methods of crop establishment, and input
use over time and relate these changes to
rainfall. The paper shows that area variability is
an important component of variability in rice
production. Most of the biological research on
rice ignores area variability and focuses on yield
variability. One important contribution of this
paper is that it shows that the risk benefits of
stabilization of rice yield in the study villages
are quite small. This is mainly due to a very
small share of rice in the total household
income. As a result, stabilization of rice income
will not necessarily translate into stabilization of
total household income. As farmer income
sources are already diversified away from rice,
rice research can have more impact by focusing
on yield improvement rather than on yield
stabilization per se. However, in other areas
where income diversification opportunities are
constrained by infrastructure and biophysical
factors, stabilization of rice yield can result in
substantial income gains.
The paper by Abedullah and Pandey
provides an estimate of the economic value of
rainfall forecast to rainfed rice farmers in the
Philippines. This is the only paper in the
volume that includes data from outside India.
Using a decision-theoretical approach, the
authors estimate the value of three types of
seasonal rainfall forecast (average, below
average, and above average). The economic
value of forecasts arises from farmers being able
to alter crop management practices if they have
access to the forecasts. To get around the
problems related to forecast accuracy, the
authors estimate the economic value of a perfect
forecast as such estimates provide the upper
limit to the value of a forecast. The estimated
value of such a forecast was found to be 1% of
the net returns from rice. For the rainfed rice
area of the Philippines, the total value was
estimated to be $6.6 million per year.
Four papers (Bhowmick et al, Thakur, Saha
et al, and Naik et al) analyze rice production
and instability in Assam, Bihar, West Bengal,
and Orissa, respectively, the major rice-
producing states of eastern India. Although rice
is grown in three different time periods in
eastern India, the papers show that rainfed rice is
grown mainly in July to November and the
variability of total rice production is determined
mainly by the variability during this period. The
Bhowmick et al paper highlights the importance
of flood risk in Assam. Overall, the variability
of rice production in Assam has changed very
little. The results from Bihar show that its
variability of rice production and yield is the
highest of all eastern Indian states. The
interaction between modem varieties and
complex hydrology in Bihar is probably the
main reason for increased production variability
in this state. Highly variable environmental
conditions could also be a reason for the
shrinkage of rice area in this state. The Saha et
al paper on West Bengal provides a more
detailed description of changes in productivity
patterns in West Bengal and how farmers
manage risk by adjusting crop management.
vii
 West Bengal is the only state with the least
variation in productivity over time. The paper
shows that low variability has resulted mainly
from stabilization of rainy-season rice
production even though the importance of
summer rice has grown over time. The Naik et
al paper analyzes the instability of rice
production in Orissa. The paper shows that the
variability in rice yield across districts is not
related to the adoption of modern varieties but
mainly to soil/climatic factors. In the case of
Orissa, opportunities to reduce risk by
manipulating crop management practices of rice
seem circumscribed by hydrological factors,
especially in the coastal belt.
From a biological perspective, the Wade
paper brings out clearly opportunities to reduce
risk through a better understanding of the
genotype by environment interactions.
Experimental data and crop simulation are seen
as important in understanding the nature of risk
and its management through manipulation of
varieties and crop management. The paper also
provides some insights into the more
downstream aspects of technology adaptation
and dissemination through farmer participatory
methods and involving nontraditional extension
agencies such as farmer organizations and
nongovernment organizations.
Summary and synthesis
The papers presented during the workshop and
the discussions that ensued covered many issues
related to agricultural growth in eastern India
and risk management. While most of the papers
used the concepts and methods that were
popularized when the study of interaction
between agricultural risk and technology
adoption was popular during the late 1970s and
1980s, the findings reported during the
workshop provide new insights into conceptual
and research issues. Some of these major issues
are summarized below.
Yield stabilization
Rice production is an important economic
activity in eastern India. Despite its importance,
the share of rice in the total household income
viii
may not be as high as often believed. If rice
contributes to only a small proportion of the
total income of farm households, interventions
that stabilize rice income are not necessarily
effective in stabilizing total household income.
Thus, yield-stabilizing technologies for a single
crop are not likely to be effective in reducing
risk, even for an important crop such as rice.
However, in areas where income diversification
is limited due to limited infrastructure or less
favorable agroclimatic conditions, the economic
cost associated with instability in rice production
can be substantial. Thus, there is a need to
delineate rainfed rice environments in terms of
the current extent of income diversification and
the possibilities for diversification in the future.
Interventions designed mainly for stabilizing
yield and incomes (such as technologies with
higher yield stability and crop insurance) are
likely to be less useful in environments with
ample opportunities for diversification.
Naturally, technologies that improve the average
yield of rice are always important, irrespective
of the nature of the environment.
Data needs
One of the major gaps in the current empirical
work on risk analysis in the context of rainfed
rice systems is the lack of information on the
relative importance of various risk-coping
mechanisms and how they change with
increasing commercialization of agriculture.
Very little information is available on the
determinants of various strategies that farmers
employ to cope with risk and their associated
cost. One of the difficulties has been the lack of
panel data to study the correlation between
climatic fluctuations and farmers’ responses.
Village-level studies such as the ones conducted
by the international Crops Research Institute for
the Semi-Arid Tropics (ICRISAT) can be
important in bridging the information gap for
rainfed rice systems also.
Risk and externality
Most of the current studies on risk for rainfed
rice areas focus on the farm or household as the
unit of analysis. Little information is available
at a higher level of aggregation such as the
community, district, or state. Often, the source
of increased risk in downstream areas may be
the result of inappropriate land use in the
upstream areas. For example, deforestation and
the use of soil-eroding practices in the upper
parts of a watershed can increase the flood risk
in downstream areas. Such risks are better
managed through the use of more sustainable
land use systems in the upper slopes than by
other means. In this regard, collective
institutions can play an important role in the
management of overall risk for the whole
watershed. However, the study of interactions
between collective institutions and risk
management remains a relatively uncharted
territory.
Macroeconomic instability and risk
Another area of research that deserves adequate
attention is the effect of macroeconomic
instability on risk in agriculture. As agriculture
changes from subsistence to commercial
orientation, the agricultural sector becomes more
prone to macroeconomic shocks of fluctuations
in foreign exchange rates and interest rates.
With the anticipated trend toward globalization
of trade following the WTO agreement, the
macroeconomic shocks are likely to be
transmitted more easily across countries.
Policies and institutional mechanisms needed to
stabilize food production and farmers’ income
under such conditions are yet to be adequately
scrutinized.
Upscaling and extrapolation
A methodological issue relates to the
quantification of the impacts (production losses,
income, and welfare) of unpredictable shocks at
different geographic scales. Farm-level losses
can be quantified through a sample survey and
other traditional methods. However,
geographically referenced spatial information on
factors that affect production losses are needed
to extrapolate such information to the regional
and subnational levels. Such databases are now
becoming increasingly available with the
growing popularity of geographic information
systems (GIS). Nevertheless, methods and
approaches are needed to upscale farm level
effects of risk to a higher level of aggregation.
Economic value of forecasts
Opportunities for reducing the economic cost of
risk by providing of forecast information have
not been adequately addressed in the agricultural
sector worldwide, except for some specific high-
value crops. In most developing countries,
climatic forecasts are rarely available in a form
useful to farmers for planning agricultural
operations. Similarly, opportunities for reducing
risk through the better use of information of
forecast prices are rarely available.
Policymakers and farmers alike have not
adequately appreciated the importance of
information acquisition and use for risk
management. Perhaps the value of information
is low in traditional subsistence-oriented
agriculture. But with increasing
commercialization, the use of forecast
information can be an important strategy for
reducing price and weather risk.
Risk analysis of rainfed rice systems
In rainfed rice areas, the overall theme of risk
analysis and management has not been
adequately studied. Parallels are drawn from
earlier work conducted in irrigated areas where
the interaction between risk and technology
adoption was widely discussed. While
theoretical and conceptual advances made in
such studies are relevant to rainfed environments
also, empirical applications for analyzing
farmers’ decisions regarding the choice of
technology, their risk-coping strategies, and the
overall effect of farmers’ risk management
strategies on production instability at the
aggregate level have been far too few. Due to
the high degree of heterogeneity in rainfed
environments, the domain of a specific
technology is likely to be much narrower. A
careful delineation of rice production
environments, based on risk profile and farmers’
socioeconomic conditions, is needed to target
technology development. With the availability
of more powerful computer technology, many
ix
powerful tools ranging from crop simulation to
GIS are now in the hands of analysts. More
studies that use such tools to quantify effects of
risk at the production systems level are needed.
Increasing the adoption of modem varieties of
rice even in rainfed areas and the growth in
income of farm households observed during the
1990s in eastern India indicate that farm
households have been able to mitigate the effect
of risk to a certain extent.

S. Pandey*
B.C. Barah
R.A. Villano
S. Pal

*Sushil Pandey and Renato Villano are agricultural economist and assistant scientist, respectively, at the
International Rice Research Institute, Los Baños, Laguna, Philippines; B.C. Barah and S. Pal are principal
scientist and senior scientist, respectively, at the National Centre for Agricultural Economics and Policy Research
(NCAP), New Delhi, India. The editors acknowledge support and encouragement from Dr. Mahabub Hossain, head,
Social Sciences Division, IRRI; Dr. D. Jha, national professor and exdirector, NCAP and Dr. Mruthyunjaya, director,
NCAP. Editorial assistance provided by Dr. Bill Hardy, Ms. Teresita Rola, Ms. Millet Magsino, Ms. Erlie Putungan,
Mr. Juan Lazaro IV, and Mr. George Reyes of the Communication and Publications Services, IRRI, is gratefully
acknowledged.

x
Units of measurement

All data on rice and production in this report are expressed in terms of rough rice. The conversion
factor used is 1 kg of rough rice = 0.66 kg of milled rice.

All monetary values for studies in India are expressed in Indian rupees. In 1997, the exchange
rate was 1US$ = Rs 36.31.

xi
Risk and rainfed rice: some conceptual and
methodological issues
S. Pandey

The study of risk and its interaction with technology is an important topic in agricultural
development. The paper provides a review and synthesis of conceptual and empirical issues
in risk analysis in the context of rainfed rice farming. Various strategies employed by farmers
for managing risk are discussed and implications of these strategies for designing and
disseminating technologies are derived. Methodological and measurement issues that require
further development are highlighted.

Rainfed rice farmers, like farmers everywhere,
have to carry out production activities in an
inherently uncertain environment. Production is
affected by drought, flood, and pests and
diseases, which occur in an unpredictable way.
In addition, farmers’ income and welfare also
depend on uncertainty related to economic
parameters such as price and marketing.
Efficient management of risk is hence the
essence of rainfed agriculture. For poor farmers,
risk considerations may loom large in their
choices of crops and the method of production.
Hence, a study of how farmers are likely to
respond to technological and policy
interventions in the face of risk is critical in
designing these interventions.
Definition and measurement of risk
Although the word “risk” is used in all walks of
life to describe the chances of some undesirable
outcome, defining it precisely and
unambiguously is not easy. This is reflected in
the following statement: “Risk is like love; we
have a good idea of what it is, but we can’t
define it precisely” (Stiglitz as quoted in
Roumasset et a1 1979). The Macquarie
Dictionary defines risk as “exposure to the
chance of injury or loss.” As “injury” or “loss” is
a subjective concept with its consequence
depending on the person as well as the
circumstance, what is considered to be risky by
one individual may not be seen to be so by
another person. Risk, hence, is subjective.
It is essential to draw a clear distinction
between risk and variability. The latter term
merely implies that a variable of interest is not
fixed but has different values. No risk is
involved if the value of the variable can be
known with certainty. For example, farm size
may vary from farmer to farmer but can be
known with certainty. Similarly, soil type within
a farm can vary from paddock to paddock but
can be known with a fair degree of certainty.
Uncertainty about the likely values, not the
variability per se, is the source of risk.
A notion such as risk that is intrinsically
subjective obviously cannot be measured by an
“objective” indicator. Subjective probability
distribution of an uncertain outcome of concern
to the decision maker, hence, is considered a
suitable indicator of risk. Under this definition,
risk can be measured by (1) the chance of an
undesirable outcome, (2) the variability of
outcome (or the converse of stability), and (3)
the probability distribution of outcome. The first
measure implies that a situation in which the
chance of an undesirable outcome is greater is
“riskier.” Although intuitively appealing, the
measure is problematic because it is not clear
when an outcome is “unacceptable.”
Statistical descriptors of the probability
distribution-suchas the variance and the
coefficient of variation—have found common

1
 use as a measure of risk. However, Rothschild
and Stiglitz (1970) showed that none of the
statistical descriptors adequately measure risk.
They contend that it is impossible to devise a
universally valid statistical descriptor of risk
without simultaneously considering both the
probability distribution of outcomes and the risk
attitude of the decision maker.
Given these difficulties in devising the
adequate measure of risk, it has been argued that
the ambiguous terms ‘more risky’ or ‘less risky’
should be avoided. If no satisfactory measuring
scale exists, then it is not possible to consider
risk as being ‘more’ or ‘less.’ What is
theoretically appealing is to view a decision as
being “risk efficient” or “risk inefficient.” Such
decisions may lead to an increase in the mean
income and/or a reduction in the dispersion of
income around the mean. Risk efficiency can be
best ascertained by comparing the whole
probability distributions of the uncertain
outcomes that correspond to different decisions.
Risk and its impact on technology
adoption
The impact of risk and risk aversion on the
choice of agricultural production techniques and
input use has been a topic of extensive
investigation (Feder et al 1985, Anderson and
Hazel1 1994). Theoretical studies on farmer
behavior under risk indicate that, in the absence
of a perfect market for insurance, resource
allocation for risk-averse farmers differs from
that for risk-neutral farmers (Sandmo 1971,
Anderson et al 1977).
The effect of risk is considered to depend on
risk perceptions and risk attitudes. Farmers may
be reluctant to adopt technologies that they
perceive to be riskier. Risk perception depends
on the quality of the information they have and
their information-processing capabilities. To the
extent that farmers perceive a technology to be
riskier than it actually is, activities such as on-
farm research to generate more accurate
information and investment in educating farmers
are warranted.
Assuming farmers’ perceptions of risk
associated with a technology to be reasonably
accurate, whether adoption occurs also depends
2
on risk attitudes. Variability of income is
irrelevant to risk-neutral farmers. A technology
that generates a higher level of mean income
would be preferred by such farmers. However,
risk-averse farmers are likely to consider
simultaneously both the level of income and risk
and to reject a technology that they consider too
risky.
Empirical evidence indicates that farmers in
developing countries are generally risk-averse
(Binswanger 1980, Walker and Ryan 1990). If
poorer farmers are more averse to risk, rainfed
rice farmers who are mostly poor are likely to be
reluctant to adopt technologies that increase risk.
In addition to this direct effect, risk aversion also
indirectly affects technology adoption through
its impact on the credit market (Binswanger and
Sillers 1983). Risk-averse lenders may demand
greater collateral and may charge a higher
interest rate, depressing credit use by poorer
farmers. Similarly, more risk-averse farmers are
less likely to demand credit. To the extent that
credit use is essential for adoption of
technologies that require purchased inputs (such
as fertilizers), risk aversion discourages
technology adoption. This indirect effect of risk
aversion is often considered to be more
important than the direct effect (Binswanger and
Sillers 1983).
The study of risk basically consists of two
aspects: risk analysis and risk management
analysis. Risk analysis consists of the study of
the nature, magnitude, and sources of risk and
how technology affects these characteristics.
Risk management, on the other hand, involves
the use of methods that reduce risk and its
impact. Even if a technology is risky, farmers
may adopt it if adequate means for diffusing risk
are available.
Risk could be studied at the micro (or farm)
level or at the macro (region or nation) level.
The purpose of farm-level analysis is to study
adoption decisions in the face of risk.
Macroeconomic parameters are assumed to be
given and farmers’ responses to risk are studied.
In the case of macro analysis. the purpose is to
study the implications of fluctuating production
for food security at the regional or national level.
Although farmers may adopt improved
technologies because they are profitable, the
instability of production at the aggregate level
may increase as a consequence. Appropriate
technological and policy interventions are
required to reduce such adverse effects on food
security.
Sources of risk
Income of farmers from agricultural production
can fluctuate as a result of fluctuations in yield,
price of output, area planted, price of input, and
input supply. Agricultural scientists are mainly
concerned with yield risk as it is often a major
component of risk, especially under rainfed
conditions. If a farmer is ultimately interested in
reducing the uncertainty of income (as income
and consumption in rural societies are highly
correlated), other components of risk can also be
important. For example, a negative correlation
between the price of rice and yield tends to
stabilize the income from rice compared with a
situation when these two variables are positively
correlated. Hence, if the interest is in stabilizing
farmers’ incomes, it is necessary to evaluate the
consequence of price instability and how it
affects income stability. Evaluation of
technology in terms of instability of yield alone
will not be adequate. The importance of price
uncertainty is likely to increase as rice
production systems become more
commercialized.
Price risk is an important component of
income risk, especially in commercialized
systems. When the use of purchased inputs is
minimal and output is mainly for subsistence,
market prices are less relevant for resource
allocation by farmers. However, in
commercialized systems where traded inputs are
substituted for nontraded inputs and output is
mainly for the market, fluctuations in prices of
both inputs and outputs can have a major impact
on farmer welfare.
A negative correlation between price and
yield is an important feature of agricultural
production, which helps in stabilizing farm
income. Prices tend to be high when production
is low and they tend to be low when production
is high. Stabilizing prices in this situation can
actually raise farm income instability. Market-
level analyses and the study of price policy are
required to help design price policies that
enhance farm income stability.
Variability in input supply and input prices
can lead to fluctuations in output as farmers
adjust input levels to prevailing conditions.
Marketing infrastructure is important in
determining input supply risks. Similarly,
government policies on production and
marketing of agricultural inputs determine input
supply and price risks.
Risk at the aggregate level
Even if aggregate food production is increasing,
wide fluctuations in total supply can seriously
affect food security at the household level,
especially that of the poor. The nature of public-
sector interventions in the food market depends
on the instability of aggregate production. The
economic costs of maintaining a bigger stock of
food grain to deal with higher instability can be
substantial. In addition, the effect of instability
at the national level also spills over to
international markets and can cause wide swings
in prices, thus affecting food security in other
countries also. Analysis of the patterns of
instability in food grain production is hence
relevant in the context of food security.
It is now widely accepted that the adoption
of improved technology consisting of high-
yielding varieties (HYVs) and associated crop
management practices has increased food
production in Asia over the last 20 years. What
is still debatable is the effect on variability of
production. The adoption of modern varieties
and improved crop management techniques can
make aggregate production more variable by
increasing interregional correlation. When
farmers grow similar varieties and use similar
management practices, adverse climatic
conditions over a large area can lead to a large
drop in production. Similarly, when the supply
of major inputs is unreliable and/or input prices
change, farmers are likely to adjust their input
use in the same direction, leading to covariate
movement in output. This economic response
can lead to increased production instability even
if the yield of modem varieties is more stable
than that of traditional varieties.
3
 Empirical evidence shows that production
variability in the aggregate has increased with
the adoption of improved varieties in India
(Hazell 1982). Much of the increase in
production variability in food grains has been
attributed not to the adoption of improved
varieties per se but to fluctuations in input
supply such as irrigation (due to power outages)
and fertilizers (Hazell 1982). On the other hand,
Walker (1989) found the adoption of HYVs of
sorghum and pearl millet to be a major factor
contributing to increased production variability
of these crops. Using district-level data from
India, Singh and Byerlee (1990) found that
variability in wheat yield, measured by the
coefficient of variation, has decreased over time,
mainly as a result of expansion in irrigated area.
Rao (1968), Mehra (1981), and Pandey (1989)
have also discussed the effect of irrigation on
production variability.
In a more recent study covering three major
crops–rice, wheat, and maize–Naylor et al
(1997) found that the variability in global output
of rice and wheat, measured by the average
percentage deviation from the trend, increased
initially with the adoption of modem varieties
but then declined subsequently. The probability
of a significant shortfall below the trend also
decreased between the pre- and post-Green
Revolution periods for these two crops. In the
case of maize, production variability was higher
during 1980-94 than during 1950-64. The
dominance of U.S. maize production in global
output and a greater downside sensitivity of
yield to climatic conditions when yields are
close to the ceiling have been attributed to the
increase in variability in global maize
production. Although the rapid growth in yield
of rice and wheat may have swamped the
increase in Variability during the Green
Revolution period, instability may be more
pronounced in the future as yield ceilings for
these crops are also approached. More evidence
on the aggregate effects of technology adoption
is contained in papers by Pal et al (2000) and
Pandey and Pal (2000).
4
Coping mechanisms of farmers
As a result of their exposure to risk, farmers
have developed various strategies over time to
avoid the negative consequences of
unpredictable variations in agricultural output. A
good understanding of these strategies is needed
to assess the likely responses of farmers to new
technologies or policies. Uptake of technologies
that complement and reinforce farmers’ coping
strategies is likely to be quite rapid. On the other
hand, interventions that undermine key
components of risk management strategies are
likely to be rejected.
Farmers’ risk-coping strategies can be
classified into ex ante and ex post, depending on
whether they help reduce risk or reduce the
impact of risk after a production shortfall has
occurred. Because of the lack of efficient
market-based mechanisms for diffusing risk,
farmers modify their production practices to
provide “self-insurance” so that the chances of
negative consequences are reduced to an
acceptable level. Ex ante strategies help reduce
fluctuations in income and are also referred to as
income-smoothing strategies. These strategies
can be costly, however, in terms of forgone
opportunities for income gains as farmers select
safer but low-return activities.
Ex ante strategies can be grouped into two
categories: those that reduce risk by
diversification and those that do so through
greater flexibility. Diversification is simply
captured in the principle of not putting “all eggs
in one basket.” The risk of income shortfall is
reduced by growing several crops that have
negatively or weakly correlated returns. This
principle is used in different types of
diversification common in rural societies.
Examples are spatial diversification of farms,
diversification of agricultural enterprises, and
diversification from farm to nonfarm activities.
Maintaining flexibility is an adaptive
strategy that allows farmers to switch between
activities as the situation demands. Flexibility in
decision making permits farmers not only to
reduce the chances of low incomes but also to
capture income-increasing opportunities when
they do arise. Examples are using split doses of
fertilizers, temporally adjusting input use to crop
conditions, and adjusting the area allocated to a
crop depending on climatic conditions. While
postponing agricultural decisions until
uncertainties are reduced can help lower
potential losses, such a strategy can also be
costly in terms of income forgone if operations
are delayed beyond the optimal biological
window.
Ex post strategies are designed to prevent a
shortfall in consumption when family income
drops below what is necessary for maintaining
consumption at its normal level. They are also
referred to as consumption-smoothing strategies
as they help reduce fluctuations in consumption
even when income is fluctuating. These include
migration, consumption loans, asset liquidation,
and charity. A consumption shortfall can occur
despite these ex post strategies if the drop in
income is substantial.
Farmers who are exposed to risk use these
strategies in different combinations to ensure
survival. Over a long period of time, some of
these strategies are incorporated into the nature
of the farming system and are often not easily
identifiable as risk-coping mechanisms. Others
are employed only under certain risky situations
and are easier to identify as responses to risk.
Ex ante coping mechanisms
Ex ante coping mechanisms are designed to
exploit low correlation among activity returns
for stabilization of total income. These operate
through various types of diversification that
characterize traditional agriculture.
Diversification may be considered as horizontal
or vertical. The former refers to scattering of
agricultural fields, growing of several crops,
growing of several varieties of the same crop,
and engaging in different income-generating
activities. The latter relates to spreading
agricultural operations over time. This refers to
strategies such as staggered planting, spreading
input use over a period of time, planting many
seeds per hill, and temporally diverse planting.
Vertical diversification is a way of maintaining
flexibility to adjust agricultural operations to the
evolving uncertainty. Similarly, share cropping
is viewed as a way of reducing risk through
sharing of risk between the landlord and the
tenant.
Spatial diversification of fields. Agricultural
fields vary from location to location in attributes
such as soil moisture retention and fertility. In
rainfed areas, these soil characteristics can vary
widely even across fields. Similarly, rainfall
distribution can also vary among fields in
different locations. These variations in soil
characteristics and rainfall across locations
create an opportunity for fanners to stabilize
agricultural output through spatial scattering of
fields. Although output from fields in one
location can decrease because of poor rainfall, it
can increase in fields in other locations that
receive higher rainfall. Weakly or negatively
correlated crop yields across fields result in
these compensating movements so that total
farm output is more stable than output from
individual fields. Spatial scattering of fields is a
way of exploiting this stabilizing effect. In
addition, this strategy may also help farmers to
better exploit specific niches of different
microenvironments to enhance productivity
enhancement. In spite of these potential gains,
spatial diversification of fields can cause an
efficiency loss because of the increased costs of
moving inputs across and marketing outputs
from widely separated fields. Whether or not
farmers use spatial scattering depends on the net
effect of these factors. In addition, local
institutions such as the inheritance law may
condition the prevalence of such a practice.
In rice-growing regions of Asia, it is not
uncommon to find a farm household operating
several parcels of land that are either spatially
scattered or differ in their location along the
toposequence. While risk considerations may
have played a role in determining the extent of
land fragmentation, casual observation indicates
that land fragmentation is driven mainly by the
desire to exploit different environmental niches
that are suitable for different crops. In parts of
eastern India, ail parcels of land are divided
among legal heirs so that everybody gets an
5
 equal share of all types of environmental niches.
The desire for an equitable distribution of land
of different quality among heirs is often
considered to be a factor constraining efforts at
land consolidation.
If land fragmentation is an effective way of
reducing risk, one would expect to observe a
greater degree of fragmentation in areas where
environmental conditions are less stable.
However, such a pattern may not be observed
due to other counteracting factors. For example,
the extent of fragmentation in the more risky
Sahel region of Africa has been less than in the
more favorable Sudan region (Matlon 1991).
This is attributed to the differences in
environmental factors in these two regions. In
the Sahel, low rainfall prevents farmers from
cultivating a wider range of field types. As a
result, cropping is restricted to only certain field
types where crop success is more assured. In
Sudan zone, higher rainfall and generally better
soil conditions enable farmers to use a range of
field types. In this example, the lack of feasible
alternatives in the highly constraining
environment of the Sahel reduced the value of
spatial diversification as a risk management tool.
Even if the inheritance law may have a big
role in determining farm size and extent of
fragmentation, farmers can and do alter their
land resource base through land rental markets.
Field experience from eastern India indicates
that tenants with a given endowment of land
types prefer to rent a different land type. Renting
a better quality land increases average income. It
may also simultaneously achieve the objective
of risk reduction.
Crop diversification. As with spatial
diversification, farm output can be stabilized by
growing several crops with poorly or negatively
correlated yields. Environmental conditions less
favorable to some crops may be more favorable
to others, so that compensating variations in
yields of different crops would impart stability
to total output. In addition to risk reduction,
there are several other potential benefits of crop
diversification, such as a better exploitation of
environmental niches, staggering of labor
demand, and meeting the demand for a range of
outputs. Mixed cropping and intercropping,
6
which are a common feature of traditional
agriculture in Asia, are a form of crop
diversification that reduces output variability
(Walker and Jodha 1986, Siddiq and Kundu
1993). Crop diversification, however, can also
be costly in terms of income gain forgone as
farm households include crops with lower but
more stable yields in their cropping pattern. In
addition, economies of size that may result from
specialization are also lost as production is
diversified.
Crop diversification is a feature of
traditional farming systems in Asia. The role of
crop diversification in risk reduction has been
analyzed extensively in the context of farming in
the semiarid tropics where farmers grow a range
of intercrops and mixed crops. Crop
diversification has been greater in the more risky
environments in the semiarid tropics of India
(Walker and Jodha 1986). In the rainfed rice
environments of eastern India, crop
diversification is greater in areas with a less
assured supply of irrigation (Pandey et al, this
volume). Crop diversification in flood-prone
areas in a village in eastern India declined after
dikes for protection from flood were constructed
(Ballabh and Pandey 1999).
Although diversification may reduce
instability, whether or not farmers are able to
diversify land use also depends on the
environmental conditions. Again taking the
example from Africa, low and unstable rainfall
and poor soils in the Sahel have constrained
opportunities for diversification, with the millet-
based cropping pattern being the dominant one.
In comparison, in the relatively favorable
environments of the northern Guinea zone, the
cropping pattern is more diversified (Matlon
1991). In addition, the more limited cropping
opportunities in the Sahel also mean that crop
yields are likely to be highly correlated, thus
reducing the benefits from crop diversification.
In the humid environments of Asia, drainage
constraints in the submergence-prone bottom
land similarly limit opportunities for crop
diversification during the rainy season.
Varietal diversification. Growing several
varieties of a crop is a form of diversification
that can stabilize the total output of the crop if
yields of different varieties are poorly correlated.
Varieties with different duration can reduce risk
by avoiding period-specific risk, For example,
short-duration varieties can escape terminal
drought that can severely affect the yield of a
longer duration variety. Similarly, varieties with
different degrees of tolerance for pests and
diseases also help reduce losses.
Rainfed rice farmers in eastern India almost
invariably grow several varieties for different
reasons, including possible risk reduction. In a
rainfed rice village in Orissa, more than 70% of
the farmers grow two to five varieties, with 20%
of the farmers growing six to eight varieties
(Kshirsagar et a1 1997). Similarly, in the rainfed
lowland of Lao PDR, 60% of the farmers grow
four or more rice varieties (Pandey and
Sanamongkhoun 1998). As with crop
diversification, other advantages of varietal
diversification are niche matching, staggering
labor demand, and generating a range of product
characteristics. These latter motives are not
directly related to risk management and may
condition the extent of varietal diversification
practiced by farmers in a given area.
Income diversification. Like crop
diversification that uses weak correlation among
activity returns to stabilize farm income,
diversification of income from farm to nonfarm
sources is another way of stabilizing income. If
fluctuations in nonfarm incomes are independent
of fluctuations in farm output, income
diversification through one or more members of
the family working in the nonfarm sector can
stabilize total family income. The extent of
income diversification may depend on factors
such as rural education, transportation
infrastructure, access to institutional credit, and
availability of local resources for nonfarm
activities. These factors may constrain
opportunities for income diversification even
when agricultural risk is high. In areas with
environmental conditions conducive to a strong
agricultural base, income-generating activities
that take advantage of agriculture’s forward and
backward linkages expand. On the other hand,
income diversification in agriculturally poor
areas tends to be outward-looking, with
households diversifying their income
geographically (Reardon et a1 1988, 1992).
Share cropping. A large volume of literature
on risk and efficiency implications of share
cropping exists (Newbery and Stiglitz 1979,
Otsuka et a1 1992). At their very basic, share
cropping arrangements that lead to sharing of
input and output also lead to sharing of risk
between the landlord and the tenant. However,
the existence of share cropping depends on
many other factors in addition to risk benefits
(Otsuka et a1 1992).
Temporal adjustments. Crop growth is a
biological process that occurs over a period of
time. The economic output is obtained upon
maturity when the crop is finally harvested. The
crop is exposed to various factors during the
intervening period between planting and harvest.
Some of these factors are known with a fair
degree of certainty, wheras others are highly
uncertain. These factors, together with
management interventions by farmers, determine
the ultimate economic value of the crop output.
Uncertainties are highest at planting time as
future values of uncertain events are known very
imprecisely. As uncertainties are resolved with
the passage of time, farmers can gain by making
decisions conditional on the occurrence of
uncertain events up to that time and the revised
expectation about the future occurrence of
uncertain events. Such a sequential decision-
making process imparts flexibility and allows
farmers to exploit favorable events for income
gains while reducing potential losses.
To assess the value of sequential decision
making, it may be useful to divide the cropping
season into early, middle, and late stages. The
early stage can be considered to include
preplanting and the period immediately after
planting. The major decisions to be made at this
stage are the crops, the variety, the timing of
planting, and the method of establishment. The
middle stage is considered to be the period
between successful crop establishment and
flowering. Major decisions here are weeding,
fertilization, control of pests, and irrigation. The
final stage is the period after flowering until
harvest.
The rainfall pattern during the early stage
may determine the choice of crops. If rains are
7
 low or delayed during this period, farmers may
forgo rice completely and expand the area under
crops that require less water. Similarly, if too
much water is received, farmers may expand the
area under rice at the expense of other crops. In
eastern India, sown area of rice contracts in
years with low and unstable early-season rainfall
(Pandey et al, 2000a). If the crop fails to
establish itself because of too much or too little
rain, farmers may decide to replant. Farmers
similarly may engage in gap filling and thinning
to reduce risk (Singh et al 1995).
The choice of what rice variety to grow also
depends partly on the nature of rainfall during
this early period. Farm-level data from eastern
India indicate that, in years with late rains,
farmers expand the area under short-duration
varieties as a mechanism for escaping terminal
drought. Expanding the proportionate area under
traditional varieties and resorting more to dry
seeding as opposed to transplanting are other
responses exhibited by farmers in eastern India.
Once the crop is successfully established,
farmers may adapt the level of input they use,
depending on their assessment of crop health. If
the crop potential appears to be low, farmers
may leave some fields unweeded and apply
lower than normal quantities of fertilizer.
Surplus resources may be used for other crops in
the same or the following season. Farmers even
replant the area with some other crops if they
anticipate the rice yield being too low and if the
season has not advanced too far (Singh et al
1995).
During the third stage, most of the
uncertainties would have been resolved and few
decisions would remain to be made. If rice fails
during this stage, farmers may go for “salvage”
operations to obtain at least the byproduct
(straw, in the case of rice). Another response
observed in eastern India is to establish post
rainy-season crops early in the rice field if soil
moisture conditions are favorable.
The temporal adjustments described above
are farmers’ mechanisms for reducing losses in
poorer years and increasing gains in more
favorable years. Relative to committing all
resources at the beginning of the cropping
season or on the basis of a fixed calendar, the
8
average farm income will always be higher
when flexible methods are adopted. However,
opportunities for using flexibility may be
constrained by farmers’ ability to process the
necessary information about crop status and the
likely future occurrence of uncertain events. In
addition, in poorer and harsher environments,
flexibility may be so circumscribed that it cannot
be relied upon as an effective risk-coping
mechanism.
Ex post coping mechanisms
How do farmers cope with losses that do occur
despite the various risk-reducing mechanisms
adopted? The shortfall in agricultural
production will reduce consumption if farmers
are not able to meet the deficit through some
other means. Depleting food and cash savings,
earning more wage income, borrowing,
liquidating assets, reducing consumption,
relying on charity, and permanent migration are
some of the mechanisms used for coping with a
production shortfall. The economic burden and
the long-term productivity impacts of these
mechanisms differ.
If farmers are able to save during better-
than-normal years and use the savings to meet
consumption deficits during drought years, they
may be able to maintain their consumption level
over time despite short-term fluctuations in
agricultural output. Savings in agricultural
societies may take various forms. They could be
held in the form of food grains, cash, and
jewelry. They could also be held in the form of
productive assets such as bullocks, farm
implements, and land. Even if own savings are
not enough to meet the consumption deficit,
village-level institutions may permit sharing of
risk across individuals such that individual
consumption fluctuates much less than
individual production.
Empirical evidence from several studies in
developing countries indicates that consumption
smoothing is a common practice among farmers
(Townsend 1994, 1995). Based on data from the
International Crops Research Institute for the
Semi-Arid Tropics (ICRISAT), crop inventory
and cash reserves play major roles in smoothing
consumption in the semiarid tropics of India
(Lim and Townsend 1994, Paxson and
Chaudhuri 1994). The importance of these two
mechanisms varies by farm size, with large
farmers relying more on crop inventory and
small farmers relying more on currency. The use
of credit was another important mechanism.
Results for Thailand were also similar
(Townsend 1995).
. The effectiveness of these mechanisms
depends on the seventy of risk such as drought
and crop output in the preceding year. Problems
are less severe in a year with mild drought that
follows a good year, and these mechanisms may
be adequate to meet the shortfall. These internal
reserves, however, may be grossly inadequate
when drought years are consecutive or if drought
is severe. In such situations, farmers may be
forced to reduce consumption, with small
farmers and landless labor suffering the most.
Based on farm-level data from arid and
semiarid areas of India, the decline in cereal
consumption in a drought year relative to a
normal year varied between 12% and 22%
(Jodha 1978). In addition, there were drastic cuts
in the expenditure on protective food such as
milk, sugar, vegetables, fruits, meat, and others.
Pandey et al (2000b) made similar observations
for eastern India. Such shortfalls in consumption
point to the inadequacy of consumption-
smoothing mechanisms, especially among small
farmers.
Livestock, in addition to being useful for
agricultural production, are also an important
store of wealth in rural societies. They serve an
important role in consumption smoothing.
During drought years, livestock are sold and
proceeds are used to meet a consumption
shortfall. Disposal of livestock can also help
reduce carrying costs, which tend to be high,
especially during drought years (Kinsey et al
1998). In the Sahel zone of Africa, where poor
environmental conditions constrain the efficacy
of ex ante mechanisms, manipulation of
livestock inventory is an important ex post
mechanism (Matlon 1991). Farmers in India
similarly use the livestock inventory to reduce
consumption shortfall (Jodha 1978).
A problem with the use of livestock for
consumption smoothing is that this coping
mechanism, while helping farmers to survive
during drought years, can reduce the long-term
production potential. Where livestock are simply
a store of wealth, this will not create a problem.
Disposing of livestock in this case would be
similar to withdrawing cash from the bank. In
fact, disposal of small animals such as goats and
sheep, which tend to be good stores of value, is
generally the initial response to income
shortfalls. However, livestock are also the major
source of draft power needed for several farm
operations such as tillage, pumping irrigation
water, threshing rice, and hauling farm inputs
and outputs. Faced with the prospect of a severe
shortage in consumption in a severe or
prolonged drought, farmers may sell productive
livestock such as cattle, buffaloes, and horses.
Once these productive livestock assets are
depleted, it takes a long time for them to be
replenished. Thus, even after the drought is over
and rainfall returns to normal, it may take
several years for farmers to rebuild their stock of
livestock. A typical feature of the livestock
depletion-replenishment cycle is that livestock
are sold when their prices are falling due to
excess supply during drought years (Jodha
1978). Increased demand during the
replenishment phase pushes the prices up,
making it more difficult for farmers to reacquire
the livestock. If several drought years occur in a
row, the livestock asset may be depleted so
severely that several years of normal conditions
would be needed for full replenishment of the
livestock. The effect of drought can thus linger
on for several years until productive assets are
fully replaced. As the mortality of livestock is
higher in drought years due to poor nutrition, the
asset base can be depleted dramatically during a
run of drought years. Thus, this coping
mechanism could be costly in terms of future
production potential forgone. The impact is
likely to be greater for small farmers than for
large farmers as small farmers often need a
longer time to replenish the depleted stock.
As with the depletion of livestock, severe
droughts can lead to excessive exploitation of
common property resources (CPR) that are a
9
 critical component of village livelihood systems
(Jodha 1986). The CPR are resources owned in
common by village residents. These include
community forests, pasture/waste land, ponds,
river banks and river beds, and groundwater. The
poorer segments of the rural population are
especially dependent on CPR, even in normal
times, to generate food, fiber, and income.
During drought periods, these resources become
even more important. For example, the reduced
supply of fodder during drought years increases
the reliance on forest and community grazing
areas for sustaining the livestock. Similarly,
additional incomes are generated by selling
timber, fuelwood, and other forest products.
Collection of edible forest products such as
fruits, nuts, and bamboo shoots also increases as
farmers attempt to meet the shortfall in
production. If these CPR are depleted
excessively during drought years, the
productivity of agriculture and livelihood of the
poor can be adversely affected for many years
even after the meteorological drought ends.
Short-term or permanent migration to earn
income from cities or far-away places is another
coping mechanism. Migration to nearby places
is likely to be less effective due to covariate
movements in income within a small geographic
area. Prospects for earning income within the
locality affected by drought are limited due to a
reduction in demand for labor in the agricultural
as well as nonagricultural sector. Employment in
far-away places or in sectors unlikely to be
affected by drought will have a stabilizing effect
as such income is less covariate with income in
drought-affected areas. In addition to seasonal
migration during drought periods, diversification
of earning with some family members working
permanently in cities helps smooth consumption.
A variant of this coping mechanism is the
marital relationship with families in far-away
places. Income transfers through this mechanism
have helped farmers in the semiarid tropics of
India to stabilize consumption during drought
years (Rosenzweig and Stark 1989). Similarly,
diversification of income from the farm to
nonfarm sector is a way of exploiting the low
covariance for income and consumption
stabilization. For example, the proportion of
10
income derived from nonfarm employment
outside the region has been higher in the riskier
Sahel zone than in the less risky Sudan zone of
Africa (Matlon 1991).
Credit can potentially play an important role
in smoothing consumption. Credit permits
borrowing against future income potential to
meet a current consumption shortfall. In a
perfectly competitive market, the opportunity
cost of credit is equal to the interest on savings.
Hence, long-run consumption will not depend on
whether savings are used or credit is taken to
meet a shortfall in consumption in poor years. In
reality, credit markets are imperfect, with the
effective interest rate on credit being higher than
the interest on savings. Risk aversion among
lenders, the high transaction cost of serving a
large number of small farmers, and information
asymmetry between borrowers and lenders are
the major reasons for capital market failure in
developing countries (Binswanger and
Rosenzweig 1986). As a result, the use of credit
for consumption smoothing in developing
countries is limited, more so among small
farmers who are considered as high-risk
borrowers by formal credit institutions.
Despite a poorly developed formal market
for credit, the available evidence on the extent of
consumption smoothing indicates the presence
of informal institutional arrangements for risk
sharing in rural areas. These may be village-
level rice banks, local money lenders, mutual
self-help groups, interlocked credit and labor
markets, and social and family networks.
Income transfers (in cash or in kind) through
these informal arrangements can provide very
effective insurance, especially if the risk affects
only a few households (Jodha 1978, Ben-Porath
1980, Platteau 1991, Fafchamps 1992,
Townsend 1995). The provision of such
insurance is believed to be one of the critical
functions of the family as an institution
(Rosenzweig 1988). Although very effective in
insuring poor households against a consumption
shortfall caused by life-cycle events such as
death or illness in the family, these mechanisms
are less effective in dealing with covariate risks
that affect everybody within the community.
Historical records of mass migration, starvation,
and death attest to the failure of these informal
mechanisms when droughts are severe and
widespread. These informal arrangements that
characterize traditional rural societies also seem
to weaken considerably in the face of
commercialization and greater exposure to the
outside world (Jodha 1978).
Publicly sponsored relief programs are used
to deal with the failure of these ex post
consumption-smoothing mechanisms in the face
of large covariate risk. To the extent that food
insecurity is due to the lack of exchange
entitlements, these relief programs are designed
to transfer income to farmers in affected areas to
reduce consumption deficits and prevent
excessive asset depletion. The relief programs
generally take the form of income transfer/
employment generation although direct food
distribution may also be a component when
drought is severe. Several authors (Corbett 1988,
Hay 1988, Dev 1996) have discussed the
strengths and weaknesses of various types of
relief programs.
Methods for risk analysis
One of the most widely applied models for
studying decision making under uncertainty is
the expected utility model (Anderson et a1
1977). Under risky situations, decision makers
are assumed to select options that maximize the
expected utility of probabilistic consequences.
To implement the model, it is essential to know
the decision makers’ attitudes toward risk and
the probability of various outcomes resulting
from an action.
Attitudes toward risk are captured in the
utility function that transforms monetary gains
and losses into utility. Risk analysis consists of
combining the subjective probability of
outcomes and the associated utility to identify
risk-efficient decisions.
Different methods are available for
estimating the utility function and the implied
risk aversion coefficient (Binswanger 1980,
Binswanger and Sillers 1983,Antle 1983). Two
popular specifications used in applied work are
the utility function with constant partial risk
aversion coefficient and the utility function with
constant absolute risk aversion coefficient.
Estimates of both types of risk aversion
coefficients have been derived for several
farming systems.
The required probability distributions can be
derived in at least two ways: using historical
data and using a predictive simulation model.
Both approaches have advantages and
disadvantages. While the use of historical data is
based on the assumption that the future will be
similar to the past, the use of a predictive
simulation model requires that the model
adequately mimic the real production system.
The use of a simulation model to predict the
consequences of changes in technical parameters
is becoming more popular (Muchow and
Bellamy 1991, Lansigan et a1 1997). Using
stochastic weather input to drive a suitably
validated simulation model, the probability
distribution of yield for a specific technical
intervention can be obtained. The distribution of
yield can then be transformed into the
distribution of economic variable (for example,
profit), which is then used for economic risk
analysis. Anderson and Hazell (I 994, Lansigan
et a1 (1997) have discussed the advantages and
disadvantages of using simulation models to
identify risk-efficient technologies.
Once the utility function and probability
distribution of income are obtained, several
approaches could be used to identify risk-
efficient decisions. A popular integrative
approach is the use of whole-farm planning
models. Variants ranging from simple stochastic
budgets to discrete stochastic programming
models are available (Hardaker et a1 1991).
Other approaches include stochastic dominance
analysis, nonoptimizing simulation models, and
variants thereof.
Objective function specification
The consequences of an action must be assessed
in relation to the objective function or what
farmers would like to achieve from their fanning
activities. While the objective function may
include aspects such as quality of life, children’s
education, and level of leisure, analysts often
focus on economic criteria such as farm income
11
and consumption. If the objective of a farmer is
to maintain a given level of consumption, the
utility function should be defined in terms of
consumption. However, as income and
consumption are highly correlated, income is
often used as a proxy for consumption. Farmers
derive income not only from rice but also from
several activities that include growing other
crops and nonfarm employment. Income from
rice is often a smaller component of their total
income, especially in the more marginal
environments. Even if rice production is low,
farmers may be able to maintain their
consumption level by obtaining additional
income from other sources. Thus, it is not
enough to evaluate rice technologies in terms of
how much additional income they can generate
from rice. Income from all sources should be
considered simultaneously.
Risk benefit and rice research
What opportunities exist for rice research to
reduce fluctuations in income and consumption
of farmers? What is the size of the economic
benefit if rice yield and production could be
stabilized? Answers to these questions are
critical for designing suitable technological and
policy interventions to reduce &he “cost” of risk.
Before proceeding further, it is essential to
define what we mean by “cost” of risk and
develop a device to measure it quantitatively.
For this, we use the expected utility model of
decision making. The model postulates that,
under risky situations, decision makers evaluate
decisions in terms of expected utility of income
and choose the action that maximizes the
expected utility. For risk-neutral decision
makers, the decision that maximizes the
expected utility is also the decision that
maximizes the expected income gain. A risk-
averse decision maker, on the other hand, would
be willing to sacrifice some income to avoid
taking risk. The cost of risk is the amount of
income sacrificed to protect or insure against
risk. Using the expected utility theory, the cost
of risk can be approximated as (Pandey et al
1999).
P = 0.5 R [a2 Cr2 + 2 a (1 - a) g Cr Cy]
12
where P is the cost of risk (or risk deduction)
expressed as a proportion of mean income, R is
the coefficient of relative risk aversion, Cr is the
coefficient of variation (CV) of rice income, a is
the share of rice income in total income, Cy is
the CV of nonrice income, and g is the
correlation coefficient between rice and nonrice
income. The proportional risk premium
measured in this equation provides an estimate
of the cost of risk currently borne by farmers
relative to the situation in which the variability
of rice income is completely eliminated. As
there will always be some variability of rice
income that cannot be eliminated, the estimate
obtained from this equation can be considered an
upper bound value.
This indicates several ways through which
the economic cost of risk can be reduced:
lowering the CV of income from rice, lowering
the ratio of rice income to nonrice income, and
reducing the correlation of rice income with
nonrice income. Stabilization of rice yield
through breeding and better crop management
can be an important research intervention. The
lowering of the share of rice to nonrice income
implies crop and income diversification. The
scope of technical intervention to achieve this
may be somewhat limited in the case of rainfed
rice, as waterlogged conditions of the fields limit
other cropping options during the rainy season.
Farmers have other cropping alternatives only
during the postrainy season, provided moisture
is nonlimiting. Development of shorter duration
varieties in areas where the success of a
postrainy- season crop depends on how early it
is established can facilitate diversification of
crop income. Other options for encouraging crop
and income diversification are related to policy
interventions such as the development of road,
transport, and marketing infrastructure. These
policy interventions can also help reduce the
correlation between rice and nonrice income by
broadening the income base of rural households.
Technology and yield risk
Technical research can basically be classified
into two types: plant improvement and crop
management. Two risk-related issues involve
plant improvement research. The first is the
issue of the extent to which improved varieties
are more or less risky than traditional varieties.
Plant breeders use stability analysis and other
forms of genotype x environment (G x E)
analysis to assess the stability and adaptability of
alternative varieties versus the traditional check.
The analysis of G x E interactions has been a
topic of interest among plant breeders and
powerful tools and methods have been
developed (Cooper and Hammer 1996).
However, most of these analyses use some
statistical notion of “stability” for discriminating
among cultivars. Such analysis could be usefully
complemented by decision analytical tools such
as stochastic dominance analysis to explicitly
account for farmers’ risk aversion (Binswanger
and Barah 1980, Witcombe 1989).
The second is the issue of the extent to
which a combination of several varieties reduces
risk. Ample evidence shows that farmers grow
several varieties of rice simultaneously in
rainfed areas (Kshirsagar and Pandey 1995,
Pandey and Sanamongkhoun 1998). Although
there may be several reasons for doing so, risk
reduction through varietal diversification
appears to be an important one (Smale et al
1994). The strategy of varietal diversification
could potentially be used to reduce the overall
risk, even if modem varieties are less stable than
their traditional counterparts.
Crop management research, on the other
hand, is concerned with altering yield risk by
manipulating agronomic practices. Agronomic
manipulation can reduce the yield risk
associated with stress conditions such as
drought, flood, and pests. For example,
improved nutrient management may help reduce
risk by making plants more tolerant of stress
such as drought as well as by helping them to
recover faster when the stress is relieved (Wade
et al 1999). Similarly, options may exist for
reducing risk by manipulating timing, placement
and quantities of inputs.
The study of the quantitative effects of input
management on risk remains a major field of
inquiry by agricultural economists, among
others. Production function specifications that
permit estimation of marginal risk effects have
been developed (Just and Pope 1979, Antle
1983). Such production functions have been
applied to derive the optimal allocation of
several inputs under risky situations. Although
attempts have been made to quantify marginal
risk effects of several inputs such as fertilizers,
irrigation, and pesticides in a range of
environments using such a framework, the
empirical analyses have often produced
somewhat inconsistent results (Roumasset et al
1989, Pandey 1989).
An important area of research in the context
of crop management technology is the effect of
uncertainty on input use in a dynamic context.
Instead of committing all inputs at the beginning
of the crop season, inputs are used sequentially,
with farmers revising the level of input use
depending on crop conditions and their
expectations regarding stochastic variables such
as prices and weather. Possibilities for such
dynamic adjustments of input use provide
flexibility for efficient risk management. In
addition, reliable forecasts of stochastic
variables such as weather can improve the
efficiency of resource allocation by reducing the
level of uncertainty (Byerlee and Anderson
1982, Abedullah and Pandey 2000).
Data needs
Farmers are concerned about risk that manifests
itself in the form of unpredictable fluctuations in
yield over time. To analyze risk and risk-coping
mechanisms, temporal data are hence required.
The generation of temporal data, however, is
expensive and time-consuming. Plant breeders
have partially got around this constraint in their
selection program by including several testing
locations to capture different environmental
conditions. Fortunately, this approach has
worked well in the past. However, this kind of
spatial substitute for temporal data is less useful
when analyzing farmers’ coping mechanisms
and in studying how risk influences resource
allocation over time through its effect on assets
of farm households. Spatial data are not of much
help in studying these dynamic elements. The
only extensive panel data that have been used
widely to study risk and many other aspects of
13
the village economy is the village-level study
database generated by ICRISAT (Walker and
Ryan 1990). A similar kind of database covering
major cropping systems would certainly be very
useful for studying responses to risk in other
rainfed environments. As indicated in the paper
by Pandey et a1 (2000a), some progress is being
made in this direction.
Strategies for developing and
disseminating risk-reducing
technologies
What are the implications of the above
discussion for developing and disseminating
risk-reducing technologies? Are the strategies
and institutional mechanisms likely to be
different from those now in place? Space
limitations preclude me from going into much
in-depth discussion on this topic, which by itself,
is very broad. Nevertheless, some comments on
this important topic are in order. Based on the
above discussion, it can be deduced that the
following features of technology help reduce
risk:
• less input demanding;
• lower degree of prior commitments of
inputs;
• technologies that improve flexibility of
decision making;
• technologies that use information about
conditioning factors;
• technologies that help stabilize area, not just
yield, as area variability can be an important
source of production variability; and
• technologies that raise income by improving
the productivity of other components of the
farming systems (e.g., those that facilitate
crop diversification and intensification).
These considerations suggest the following
strategies for technology development,
adaptation, and dissemination for reducing risk:
• Emphasis on technologies that reduce yield
losses in unfavorable years rather than those
that increase yield in favorable years only
(downside risk). However, trade-off between
yield gain and instability may be inevitable.
• More emphasis on developing durable
14
resistance to pests/diseases and abiotic
stresses. Molecular techniques may have a
major role to play, especially when dealing
with polygenic traits.
• Development of a “basket” of
complementary options in which each
component can also stand on its own.
Although productivity improvement can be
high when several components are
combined in the form of a package, such
packages also tend to increase risk. By
allowing farmers to pick and choose from a
complementary basket of options, such an
approach makes sequential adoption of the
most profitable (and least risky) components
possible.
• More adaptive research and decentralized
regional testing for specific adaptation.
Specific technologies for each region
developed through adaptive research will
improve the suitability of such technologies
to their target domain and reduce risk. This
will also stabilize production by reducing
interregional correlation. Such a strategy is
more relevant for heterogeneous marginal
areas where risk and its effect on the poor
tend to be high.
• technology testing under farmers’ conditions
using their own criteria for evaluation;
• As opportunities for management
intervention decrease with the progress of
the cropping season, crop management
technologies may be more effective to
reduce risk in the early part of the growing
season. Germplasm-based intervention may
be more suitable for late-season risk (such as
terminal drought) or for other risk for which
no management interventions are yet
available.
• As research strategies differ according to
sources of risk that vary across locations, a
greater understanding of the nature and
magnitude of risk in representative
environments is required. Such an
understanding is likely to be facilitated by
strengthening socioeconomic research
capacity in national agricultural research
systems. Limited capacity in this field is
quite a severe constraint currently.
 Regarding the approach to extension, the
dominant paradigm for extension for a long time
has been that based on “transfer of technology
(TOT).” This was the approach followed during
the Green Revolution and it has met with
success mostly in favorable areas. This one-size
fits-all approach can actually increase risk as it
requires increased outlay on several inputs
simultaneously and is also more demanding of
farmers’ skills. The TOT approach based on the
promotion of technology packages is less
suitable for disseminating risk-reducing
technologies as it does not facilitate use of
information about crop condition.
The extension approach needed to
disseminate risk-reducing technologies should
be based on providing information (as opposed
to inputs) to farmers and on empowering them to
use it correctly. The extension system needs to
provide options rather than recommendations
and train farmers to use information as the basis
for decisions. It has to be able to provide advice
to farmers based on conditioning factors.
Conditional recommendations can be complex
and may contain several “if-then’’ rules. The
usual extension approach designed to provide
simple messages and technological packages is
not suitable for risk-reducing technologies.
Although improved varieties can spread quite
effectively from farmer to farmer as witnessed
during the Green Revolution, such a mode of
transmission is unlikely to be successful for
complex information. Research in the context of
integrated pest management has shown that
farmers are unlikely to adopt such technologies
unless they understand some basic principles
involved. Thus, the role of extension would be
not only to transmit recommendations but also to
impart knowledge to farmers so that they can
monitor crop and field conditions better and
make appropriate adjustments in their crop
management practices.
However, extension systems in developing
countries are mostly funded inadequately.
Extension agents are inadequately trained and
lack incentives and skills to provide knowledge
about crop management options to farmers.
Incentives to extension agents are oriented to a
physical target such as distribution of a certain
quantity of seeds, fertilizers, and other inputs.
These institutional weaknesses of extension
systems have been well recognized and various
alternatives have been attempted. However, the
situation in most cases has changed very little.
More efforts are needed to design extension
systems so that they can be more effective in
promoting the dissemination of risk-reducing
technologies.
Crop insurance
The topic of crop insurance remains a highly
debated issue with many eminent economists
contributing to this debate. A brief review of this
debate is contained in the paper by Mishra
(2000). The major problems with crop insurance
are related to the difficulties in dealing with the
moral hazard, adverse selection, and the
resulting high cost of publicly sponsored crop
insurance programs (Hazell et al 1986). Various
innovative concepts such as those based on
rainfall lotteries have been developed. However,
the cost of implementing such schemes remains
a major issue. In the context of poor rainfed rice
farmers who are often the primary targets of
crop insurance programs, the price they are
willing to pay for yield stabilization through
crop insurance programs may be too low for the
scheme to be viable without subsidy. As the
analysis presented later suggests (Pandey et al,
2000a), expansion of rural nonfarm employment
opportunities and crop intensification during the
dry season in areas with tubewell irrigation have
helped increase and stabilize farm household
incomes. As a result, the proportional risk
premium associated with yield stabilization of
rice is substantially lower than what it is
normally presumed to be (Pandey et al 1999). In
addition, crop insurance schemes based on
stabilizing yield will have little value in many
rainfed areas where area variability is also quite
high. Nevertheless, crop insurance may be of
value to regions where agroclimatic conditions
and limited infrastructure constrain the operation
of other mechanisms for smoothing income flow
over time.
15
Concluding remarks
In concluding, managing agricultural risk
effectively remains an important challenge to
farmers, agricultural researchers, and
policymakers alike. Much progress has been
made in understanding the likely effect of risk
and risk aversion on technology adoption, in
developing approaches and methods to quantify
risk, and in analyzing its ramifications for
national food security and poverty. Despite this,
much remains to be done, especially as emphasis
on reducing poverty by stimulating agricultural
growth in rainfed areas has increased in recent
decades. The high degree of temporal and spatial
heterogeneity, chronic poverty, and limited
linkages with the national economy are some of
the major factors that have constrained
agricultural growth in these regions. Although
some of these rainfed areas are now showing
signs of economic dynamism, effective
management of agricultural risk in these areas
can be an important way of inducing agricultural
growth.
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Discussion
Question: We are looking for the reasons of
instability in rice production.
Many factors affect productivity at
the farm level. Is it necessary that
we should examine all these factors
for the management of risk?
Answer: While the output is determined by a
large number of deterministic
factors (such as soil type),
stochastic factors (such as rainfall)
and farmers’ management (such as
input use), the purpose of risk
analysis is to understand how
stochastic factors interact with
deterministic factors in generating a
particular management response.
As risk is pervasive, it can affect
many decisions of farmers. For
pragmatic reasons, one would
attempt to tackle only those aspects
that are likely to affected more
significantly by risk considerations.
Question: We have to measure risk in terms of
the lower half (negative deviations
from trend) of the probability
distribution. A subsistence farmer
is concerned more about the
number of years of crop failure in a
time period. But in terms of
profitability, more than average
returns may be received during
years of favorable price changes. So
there may be value in examining
variations in both the directions of
the mean. In terms of measurements
of risk, there are plenty of concerns
regarding the use of covariances
and coefficients of variation. What
are your views on the suitable
measures of risk?
Answer: The theoretical analysis on risk
shows clearly that risk can be
measured only by examining the
whole probability distribution along
with the decision maker’s utility
function. Summary statistics such
as variance and coefficient of
variations are merely statistical
descriptors of variations around the
mean. These descriptors ignore the
higher moments of distribution and,
as a result, they can only tell a part
of the story except under very
restrictive assumptions about the
nature of probability distribution
and utility function. Although we
often talk about technologies being
“risk-increasing” or “risk-
decreasing”, a theoretically more
satisfactory approach would to be
consider them as “risk-efficient” or
“risk-inefficient”.
Notes
Author’s address: International Rice Research
Institute, MCPO Box 3 127, Makati City
127 1, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
19
Risk and rainfed rice in India: an overview
C. Ramasamy and K. Uma

Rainfed rice production in eastern India is inherently risky due to high climatic variability. Rice
yield fluctuates widely depending on the vagaries of the monsoon. Although variability in rice
output is relatively less important in India, uncertainty about prices of inputs and their timely
availability is also an important source of risk. This paper provides an overview of empirical
studies that have addressed the issues of risk, risk aversion, and their effects on technology
adoption in the context of rainfed rice systems of India. Opportunities for reducing risk
through improved technologies and policy reforms are indicated.

Agricultural decision making, whether at the
sector, farm, or project level. is invariably
characterized by considerable risks. Agricultural
production is inherently a risky activity in
rainfed areas where agroclimatic conditions
largely dictate the decisions of farmers. Risks
may arise from many sources. but they emerge
primarily from the variability inherent in natural,
climatic, and biological systems. Risk is
particularly a pervasive phenomenon in the
agriculture of developing countries and deserves
careful attention both for policy formulations
and for planning and appraising projects that aim
to improve the lot of people in these countries
(Scandizzo et al 1984).
Eastern India accounts for 67% of the total
rice area and about 56% of the total rice output
of the country. In spite of the region’s
importance, rice yield has remained low and
highly variable. Climatic risks are the major
reasons for such low and fluctuating yields
(Widawsky and O’Toole 1990). Both droughts
and floods are endemic to major areas, at times
occurring in the same field in the same year.
Because of the high risk involved. farmers are
uwvilling to invest in yield-increasing
technologies that require a greater cash outlay
for inputs such as chemical fertilizers.
A considerable amount of literature has
appeared on risk in agriculture (Lipton 1979,
Binswanger 1980. Anderson and Hamal 1983,
Martin and McLeay 1998). Many studies have
dealt with farmers’ perceptions of risk and their
innate aversion to risk. Some of the key areas
that have been analyzed are risks associated with
Green Revolution technologies, rainfall
variability, farm credit. agricultural subsidies,
farm diversification, irrigation, crop insurance,
agricultural instability and poverty, and impact
of drought and risk management. This paper
reviews some of the studies related to risk and
risk management in rainfed rice with special
focus on eastern India.
Sources of risk
In eastern India, weather conditions in a season
emerge as the dominant source of risk in
agriculture. Inadequate and unevenly distributed
rainfall, droughts and floods, extremes of cold
and hot temperatures. cyclones, and storms
result in heavy yield losses. Weather fluctuations
can result in cyclical movements in output and
cause an erosion of the real value of financial
investment in agriculture. These factors lead to
underperformance of the agricultural sector
(Ramachandra 1983).
Recent studies suggest that agricultural
output has become more sensitive to rainfall in
the post-Green Revolution period, with elasticity
of output (with respect to rainfall) increasing for
most crops. This may be brought about by the

21
 strong complementary relationship between the
use of modem varieties and inputs and the
availability of moisture through either rainfall or
irrigation (Rao et a1 1988). Rainfall indices for
crops, constructed as a proxy variable for
measuring the effect of weather on area and
output of different crops at the all-India level,
have consistently shown that a significant part of
the fluctuation in area and output around their
respective trend lines could be explained by the
computed rainfall indices (Ray 1983).
Data on rainfall and food production in
Orissa ( 1958-59 to 1978-79) indicate that the
years of lowest production are also the years
with deficit rainfall up to 30-35%. Similarly, in
Punjab, the lowest production is associated with
a relatively large deficit in rainfall in spite of a
high percentage of area being under irrigation in
the stare (Singh 1981).
The impact of weather risks on agricultural
production in India, where 70% of gross cropped
area is still rainfed, underscores the need for
systematic efforts toward improving our
prediction of weather movements and our
estimation of losses to the economy in terms of
output, employment, etc.
Another potentially important source of risk
is the market price of inputs and outputs.
Agricultural product prices are generally
regarded as stochastic. Fluctuations in these
prices can be a major source of variability in
farmers’ incomes. Production risk due to
weather also contributes to price fluctuations
indirectly-thus,weather-induced risks and
price risks are linked. Risk may also arise from
unpredictable changes in consumer taste and
policy. There is a growing recognition that the
political framework within which support prices
are determined can also lead to uncertainty
(MacLaren 1983).
Several supply response studies in
agriculture have shown that price risk influences
production (Gour 1978, Ramasamy 1979). Price
instability and the resulting variations in income
can affect allocation of land to various crops and
use of fertilizers (Singh and Walker 1984). Price
instability may similarly discourage the adoption
of new production technologies. The wide
swings in area of some commercial crops and
vegetables can be attributed to large variations in
22
their prices. However, rice in India is protected
through price support programs. The
administered prices being implemented for the
past several decades for rice had almost
stabilized prices. The variation in rice prices
likely to be induced by demand factors is
insulated by the operation of a public
distribution system. Overall, the uncertainty in
the price of rice is not an important element of
risk in India. This situation may change,
however, with the opening of the export market
under World Trade Organization arrangements.
Unless globalization of agriculture is
accompanied by policy reforms to minimize the
transmission of price shocks from international
to domestic markets, farmers may experience a
greater price uncertainty.
Timely availability of critical inputs such as
fertilizers and plant protection materials is a
prerequisite not only for encouraging adoption
of improved production technologies but also for
sustaining agricultural production. The
nonavailability of crucial inputs is often
considered to be a factor contributing to high
yield gaps in rainfed areas (Pandey and Ashok
Kumar 1993). An erratic power supply to
agriculture can similarly increase risk in farm
production (Ray 1983). The performance of
institutions to provide inputs, credit, extension,
and other support services has also influenced
yield variability (Nadkami and Deshpande
1982).
In areas where rainfed rice is supplemented
by water from irrigation tanks such as in
southern India, poor management of the
irrigation system can destabilize food-grain
production (Kandaswamy 1988, Sasmal 1993).
Tanks probably constitute the oldest means of
providing irrigation water in these areas. In
recent years, tanks have become an unreliable
source of irrigation water supply. and farmers
consequently face greater risks and uncertainties
(Randhir and Krishnamoorthy 1993).
In the same manner. unavailability of good-
quality inputs at critical times can increase risk
to farmers. It is common knowledge that many
Indian farmers complain about the poor quality
of fertilizers and pesticides. Similarly.
Uncertainty in labor supply and the use of
unskilled labor in large numbers can have a risk-
increasing effect (Sasmal 1993). Many farmers,
especially those with small holdings, do not get
loans linked to new methods because of higher
risks perceived to be associated with new
technology (Anderson and Hamal 1983).
Rokaya (1979) found that 85% of small farmers
and 33% of large farmers in Nuwakot District of
Nepal did not use agricultural credit because of
the higher risks that they associated with the
new technology.
Risk and adoption of new technology
The effects of risk, risk aversion, and risk
perception on technology adoption have been
widely studied. Risk and uncertainty in
production have been recognized as an
important constraint to the rapid adoption of
high-yielding varieties (HYVs) (Sasmal 1993).
Innovative methods of cultivation often
introduce more uncertainty than traditional ones.
If these innovations are adopted, they must not
only bring higher average returns than the older
methods; they should also reduce the risk (Low
1974). Adoption may be constrained if farmers
are risk-averse or perceive a new technology to
be riskier than traditional technology.
Some evidence points to production
instability accentuated by factors associated with
the new agricultural technology (Mehra 1981,
Hazell 1982). The shift from traditional crop
varieties with a diversified genetic base to HYVs
with a narrow, common genetic base might have
contributed to greater instability. Covarjate
movements in yields resulting from instability in
input supply could have also led to the increased
variability of aggregate output. Similarly, the
substitution of chemical fertilizers for organic
manures may have aggravated instability
through potentially adverse effects on soil health
(Ninan and Chandrashekar 1993).
Farmers’ behavior and efficiency
Risk also affects decisions on varietal selection,
agronomic practices, crop combinations, input
management, and marketing of products. Some
inputs-such as fungicides and pesticides-are
overtly risk-reducing in their effects. If such
inputs are used wisely and in a timely manner,
production will be less risky (Anderson and
Hamal 1983, Holden et al 1991). However,
farmers may err in judgment since risk
perceptions depend, in part, on their knowledge
and experience (Anderson and Hamal 1983).
Sasmal (1993) considered, along with
weather conditions, the nature of irrigation and
soil conditions, and the farmer’s efficiency in
explaining output variability. Ranganathan and
Ramasamy (1993) reported farm-level
efficiencies of rice production in semidry
conditions of Tamil Nadu. They found
significant differences in resource use efficiency
across farms, which can largely be ascribed to
variations in farmers’ efficiencies. Their
decisions on adjustments in agricultural
operations, sequences, timings, and input
combinations are crucial to achieving higher
production efficiency.
Singh and Zilberman (1984) reported
inefficiency in land and fertilizer allocation by
Punjab farmers. The existing farm plans were far
from the efficient mean-variance frontier,
implying that the crop plans followed by farmers
were inefficient with regard to the minimum risk
portfolio. To ensure subsistence, farmers with
low levels of resources allocated most of these
in a conservative manner. Farmers with higher
levels of resource availability, on the other hand,
allocated a greater proportion of resources to
activities that increase their average income.
Risk management
Farmers use both formal and informal strategies
to cope with risk in agriculture, but their reliance
on formal strategies has been growing (Rustagi
1988). Several studies have suggested the use of
farm diversification as a risk precaution, though
the prime objective may be one of profit
maximization. Under a situation of risk and
capital constraints, diversification stabilizes farm
income at a higher level (Gupta and Tewari
1985). Intercropping often provides insurance
against complete crop failure (Singh and Walker
1984). Livestock are similarly used as a buffer
against risk and uncertainty.
Improvements in irrigation and marketing
facilities and investment in soil conservation can
reduce yield and price risks (Singh 1989).
23
 Improved storage facilities, including on-farm
storage, likewise facilitate the carryover of
stocks from one period to another and help
smooth consumption (Sahn and Von Braun
1986).
Formal strategies include programs such as
crop insurance, input subsidy, output price
support, credit with variable amortization
schemes, income equalization schemes, and
disaster assistance schemes. Crop insurance,
though a risk-reducing strategy, has several
limitations. Public intervention in crop insurance
may require subsidies in the initial phases. The
justification of a public subsidy for crop
insurance comes from the proposition that, if
farmers are less risk-averse, they would expand
their production and this, in turn, would increase
total production and add substantially to social
gains (Hazell et a1 1986). Walker and Jodha
(1986), however, point out that crop insurance
might simply provide a costly substitute for the
existing private risk-sharing arrangements.
Conclusions
Risk will continue to be an important factor in
the rainfed agriculture of India. Several
interventions are needed to reduce risk as well as
its impact on farmers’ welfare. These
interventions include both agricultural research
and policy reforms.
On the agricultural research front, there is a
need to better understand the sources of changes
in variability of yield and area in the different
agroecosystems of India. Research to develop
improved varieties that have increased tolerance
to various biotic and abiotic stresses must be
strengthened. This may be achieved by
• shortening the life cycle of cereal crops and
reducing their sensitivity to seasonal signals
such as daylength;
• introducing hardiness into crop varieties to
enable them to withstand drought, cold,
heat, and other climatic stresses;
• incorporating genetic resistance to pests and
diseases (Holden et a1 1991);
• introducing “competitiveness” in varieties to
enable them to survive in marginal
environments; and
24
• improving the physiological efficiency of
the rice crop in a given agroclimatic
condition.
Similarly, cost-reducing strategies that focus on
economizing and substituting for external
resources must be implemented-forinstance,
legumes that are important sources of nitrogen
can be used instead of synthetic fertilizers, and
resource (soil and water) conservation and
shifting to sustainable alternatives (natural
farming, watershed management, biological
methods of pest control and nutrient use) can
help reduce risk. Better agronomic management
of crops is essential to facilitate rapid crop
recovery following stress periods and to improve
input use efficiency. The economics of such
practices, however, needs careful evaluation.
On the policy front, provision of special
credit facilities to drought-prone and rainfed
areas in the form of production and consumption
loans may help farmers minimize the impact of
risk. Development of labor-intensive
technological packages for lagging regions and
crops supported by land reform would
strengthen farmers’ ability to manage risk. Other
risk management methods that require policy
support include maintaining food buffer stocks,
food subsidies, relief employment, and food for
work programs (Hazell 1986, Rao et a1 1988).
Price stabilization schemes and financial
innovations such as commodity-linked financing
(as a hybrid instrument) can similarly help
reduce risk. However, the likely effectiveness of
such innovative mechanisms needs to be
carefully evaluated in the context of eastern
India.
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Discussion
Comment: There are some more risk manage-
ment strategies like migration to
minimize reduction in consumption
in the years of complete crop
failure. This strategy is also
followed in rainfed rice-growing
areas of eastern Madhya Pradesh.
On the sources of risk, it is
important to consider risk induced
by mismanagement of resources and
breakdown of several institutions
managing the resources, e.g.,
deterioration of irrigation tanks in
Tamil Nadu.
26
Question: Can you just give us some idea
about measurable indicators of risk
and risk management strategies
under different risk environments?
Answer: I have just touched upon the key
themes, and to address these issues,
I think, one has to examine the
available literature critically.
Although agricultural researchers
give much emphasis on climatic
risk, risk arising from institutional
failures can be very important. This
aspect of risk is not well-addressed
in the current literature. Regarding
the indicators of risk, I agree with
the comments made by Dr. Pandey
earlier.
Question: Is it possible to distinguish between
perception of risk versus perception
of the quality of a specific
technology? For example, if a
farmer says “I do not want some
technology”, does this mean that the
technology is not good enough, or
the risk associated with adoption of
technology is too high?
Answer: Perhaps both. It is, however, not
easy to separate these effects clearly
as farmer responses are generated
by the interaction of both of these
factors. Nonadoption may be
because the expected returns are
low, or because risks are just too
high. It may also be because a
farmer faces other constraints to
adoption such as lack of capital. A
modeling framework is needed to
disentangle the relative importance
of these individual effects.
Comment: Risk analysts often restrict their
attention to certain artificial
boundaries of privately owned
resources. Risk management,
particularly in rainfeed ecosystems.
should also be looked at in terms of
collective management actions. For
example, if a large area is flood-
affected, it is important to see the
economics of its collective
management. As regards risk and
 technology adoption, one should
evaluate technology performance in
terms of farmers’ goals and under
farmer conditions.
Comment: We should also devote some time to
discuss some macro aspects of risk
management like crop insurance,
institutional credit in the context of
natural disasters, technological
interventions (breeding strategy,
crop and input management), and
associated costs or trade-off.
Comment: The issues like crop insurance
involve some institutional aspects
and it is not clear who the
implementing agencies are. Since
1991, economic scenario has
experienced tremendous changes
with the emergence of the private
seed sector. We should discuss some
of these institutional issues, and the
role of national and state
governments and private financial
institutions.
Comment: It is unrealistic to think that a
particular technology will have
uniform and wider adoption without
adaptive efforts by researchers,
extension workers, or farmers. It
would be better if we have some
research strategy for a particular
environment, as we are doing for
rainfed lowlands. Some technolo-
gies like pest resistance, changing
crop cycle or duration are pretty cost
-(trade-off) neutral. But
reemployment of energy flows in
plants may involve substantial cost.
Comment: Our main concern here is to identify
the nature of risk and its manage-
ment strategy in the context of
rainfed rice in eastern India. The
risk mainly arises from erratic
rainfall, inadequate irrigation or
moisture stress, salinity and
stagnation of water. We should,
therefore, concentrate on mini-
mizing these risks with the help of
technological development and
appropriate policy actions.
Comment: Implementation of crop insurance is
a real problem in areas with low and
uncertain crop yield. The problems
relate to paucity of data to determine
the threshold yield level, basis of
cost sharing by the national and
state governments and efficiency of
implementing agencies. In addition,
there are moral hazards like excess
claim of crop failure (as observed in
the case of institutional loans), and
involvement of huge subsidies that
cast shadows on viability of the
scheme. It would be better if other
policy options are explored to
safeguard against risk.
Comment: A successful crop insurance scheme
may first be implemented in better
endowed areas and subsequently to
other low productive areas. Maybe
one should think of some modified
crop insurance approach. As
regards price risk and crop failure
linked to suicide by farmers, we
need some more evidences.
Response: High crop losses or complete crop
failures reported recently are partly
due to changes in the behavior of
insects-pests. When farmers apply
high doses of pesticides, pests
migrate to other host crops, which
also suffer. The problem is further
aggravated by high prices and poor
quality of pesticides supplied by
traders who often lend money to
farmers. As a result, farmers not
only lose the kharif crop but also
fail to ensure the subsequent crop,
resulting in cumulative indeb-
tedness.
27
Notes

Authors’ address: Tamil Nadu Agricultural

University, Coimbatore, India.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
2 1 -23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

28
Decomposition of income variability in rainfed
areas: the case of rice in eastern India
B.C. Barah

Panel data from 130 districts in five rainfed states in eastern India for 1981-93 are used to
decompose revenue variability into its yield and price components. This period witnessed
various degrees of improvement in rice productivity in eastern India. The decomposition
analysis shows that, out of 91 rainfed districts, the yield component exceeded the price
component in 26 districts, whereas the price component exceeded the yield component in 38
out of 39 irrigated districts. It is inferred that the production-relevant infrastructure reduces
yield variability in the well-endowed region and the price component of risk becomes
stronger. In the case of rainfed areas that are also less endowed with infrastructure, yield
variability was found to be the dominant source of income variability. Regionally differentiated
stabilization policies that address major sources of risk in each region are hence needed.

A low level of yield, high variability. and
susceptibility to erratic climatic conditions are
the major characteristics of agricultural
production systems in rainfed areas. These
systems are subjected to extreme income
fluctuations from year to year. Apart from
temporal variations, interregional variations are
also quite substantial. Crops in these areas suffer
from drought, submergence, and often both in
the same season. In addition to weather
uncertainty, other sources of risk such as those
arising from inefficient pricing policies may also
amplify the effect of production risk. A good
understanding of the component sources of risk
and their interactions is essential for
interventions such as price stabilization, crop
insurance, buffer stock policies, and
infrastructure development. The objective of this
paper is to provide estimates of the relative
shares of price and yield components in the total
variability of gross revenue of rice.
Agricultural land is classified into rainfed or
irrigated mainly in terms of availability of
irrigation (IFPRI/NCAP 1998). Appendix 1
presents the classification of various districts in
eastern India according to irrigation status. Out
of 130 major rice-producing districts in eastern
India, 39 are considered irrigated as they have
more than 40% of the rice area irrigated. Table 1
shows the average rice yield and its variability.
Although the region is predominantly rainfed,
irrigation facilities have developed in a few of
the districts in recent years. As a result, the
average yield in irrigated districts is higher than
that in rainfed districts. Furthermore, instability
measured by the coefficient of variation is lower
in the irrigated districts.
Method of analysis and data
A simple method of decomposition (based on
Taylor’s series expansion) of the variance of
crop income is used. The method is simple
because it involves only a single crop (rice). The
advantage is that it allows the measurement of
variability and its components across different
agoclimatic environments in a comparative
fashion. It decomposes total variability into a
price component, a yield (productivity)
component, and price-yield interactions. An area
component can also be incorporated into the
decomposition procedure but is not considered
in this analysis, as its variation is almost
negligible.

29
 Table 1. Average yield of rice and its variability in eastern India, 1966-93.

Rainfed districts Irrigated districts

State Yield Irrigated Yield Irrigated

area area
kg ha-1 CV (%) kg ha-1 cv (%)

Bihar 1,902 19 13 2,530 16 80

Orissa 1,870 21 25 3,405 13 54
West Bengal 2,998 29 13 3,108 12 58
Madhya Pradesh 1,458 42 4 2,755 28 73
Uttar Pradesh 2,291 36 12 2,723 25 69

Consider the following data set consisting of
district “i” and year “t,” where
i = 1,2, . . . , L (district subscript)
t = 1,2, . . . , T (year subscript)
Q = district-level yield of rice
P = farm prices
The data series on Q and P are detrended
appropriately to adjust for technical change as
well as inflation so that their variations reflect
the pure variability effect only. M is the per unit
area revenue from rice, then
Mt = PtQt
By suppressing the subscript t, we can write the
variance of M as’
V(M) = p2 V(Q) + q2 V(P) +
pqCov(PQ) + R
Lower-case letters denote the corresponding
averages. The analysis is based on gross revenue
as data on input costs, by districts, are not
available.
For the sake of simplicity, the CV-type measure
of V(M) will be used to quantify yield risk in
each district.
CV(M) ~
= CV(Q) + CV(P) + CV(PQ)
where CV(Q) = coefficient of variation of yield
component, CV(P) = coefficient of variation of
price component, CV(PQ) = coefficient of
variation of interaction between P and Q.
The individual components are standardized and
expressed in percentage form. That is,
C_Q% = 100 CV(Q)/{(CV(Q) + CV(P) +
CV(PQ)} and
C_P% = 100 CV(P)/{(CV(Q) + CV(P) +
CWQ)} (4)
The measurement of risk in crop production
should ideally be based on farm-level data. Farm
(1) records are, however not available for a
sufficiently long period of time. District-level
data were hence used for the analysis.
Results and discussion
(2) Rice yields have increased over time for most
districts. As a result, several districts have
moved from a lower to a higher class of yield
category (Table 2). The arrows indicate the
direction of the mobility of the districts from one
productivity class to another. The mobility of the
district from a lower level to a higher echelon of
productivity could be considered as a reward to
efficient research and development efforts and
other strategic policies. West Bengal has shown
a noticeable mobility by improving rice
(3) productivity in all the districts generally.

1For details of the approximation of the formula, see Goldberger (1970) and Burt and Finley (1964).

30
Table 3. Districts with different yield and price components.
Rainfed Irrigated
districts districts
No. of districts analyzed 91
Districts with
- Price components
exceeding yield: P>Q
- Yield components
exceeding price
component (Q>P) 26
- Indifferent price and
yield components (P Q) 65
However, compared with Uttar Pradesh and
West Bengal, productivity gains in Orissa,
Madhya Pradesh, and Assam are almost
negligible. The introduction of structural
reforms and vigorous implementation of several
strategic policies in West Bengal and Uttar
Pradesh in recent years have helped enhance
productivity as compared with other states in the
region.
Out of 91 rainfed districts, the yield
component exceeds the price component in 26
districts, whereas the price component exceeds
the yield component in 38 out of 39 irrigated
districts (Table 3). This indicates that the price
component is the dominant source of revenue
variability in irrigated areas and that the yield
component is the dominant source in rainfed
areas. Overall, the average of the yield
component for rainfed districts was 23.6%; the
corresponding value for irrigated districts was
20.2%. The results show that the importance of
yield variability is higher in rainfed districts than
39
in irrigated districts.
Figures 1-4 summarize the relationship
38
among the yield, price, and yield-price
interaction components. The vertical axis
represents the yield component and the
1 horizontal axis, the price component. For
districts above the 45" line from the origin (AB
in the figure), the contribution of the yield
component exceeds that of the price component,
whereas for districts below the line, the reverse
applies. For those lying on or near the line, the
sum of the contributions of the yield component
and price component is exactly equal to the total
variability, that is the interaction term is zero.
The districts lying above the line (i.e., the ones
with the yield component exceeding the price
component) are usually less developed and have
a poorer infrastructure base.
The results indicate the need for differential
policy interventions for price-variability- and
yield variability-dominated districts. Production-
relevant infrastructure such as irrigation has
reduced yield variability in well-endowed
regions, making the price-variability component
stronger. The reverse is true for rainfed districts.
Pricing policy incentives are more relevant in
districts where yield variability is relatively low;
crop insurance (Mishra, 2000) or other yield
stabilization policies are relevant in districts
31
32
where yield variability dominates. The minimum References
support pricing (MSP) policy and the bonus
price (some state governments provide an Burt OR, FinIey RM. 1964. Statistical analysis
incentive price over and above the MSP of identities in random variables. J. Polit.
announced by the central government from time Econ. 50:734-744.
to time) are more beneficial to market-oriented Goldberger A. 1970, Criteria and constraints in
farmers. However, such price incentives have multivariate regression. Wisconsin
little relevance to subsistence farmers who are University, Social Systems Research
normally subsistence-oriented. Institute, Madison, Wisconsin, USA.
IFPRI/NCAP. 1998. Sustainable rainfed
Conclusions agricultural research in India. Draft report of
the IFPRI/NCAP project. Washington, D.C.,
Farmers in rainfed areas face a much higher USA:IFPRI.
yield risk than those elsewhere. The poor
peasants in these less endowed regions are likely
to face even higher income fluctuations relative
to their counterparts in better endowed areas.
The major components of risk vary among the
districts, with yield risk dominating in rainfed
areas and price risk in irrigated areas. Therefore,
the price stabilization policy alone cannot
benefit producers in poor areas. Technologies
and policies that help increase and stabilize yield
are needed for rainfed areas.

33
Discussion

Comment: We have been discussing the risk or

variability in relation to
technology, farming practices and
to some extent, policy aspects.
Looking from an anthropological
point, I think there is a middle area
of local institutions, which is rather
missing in our discussion. For
example, farmer loose control over
resources because of inefficiency in
irrigation system, contributing to
risk felt by him. There could be
development of some middle-level
institutions, derived by common
interest of farmers, as an option to
decrease/manage risk.
Question: Your results on regional pattern of
price risk are in contradiction with
the general perception. In less
developed areas, markets are not
that developed and farmers do not
get remunerative prices. But your
results indicate that yield
variability is a dominant source of
income variability. In developed
areas like Punjab where markets
are well developed, farmers get
higher prices in the year of lower
production, compensating for any
shortfall in yield. Moreover,
farmers in developed areas have
the capacity to hold the stocks for
sale at the time of better prices.
Answer: I do not see any contradiction.
The results merely indicate that
price factor contributes more to the
income variability in irrigated
areas. This is mainly due to the
fact that yields are much more
stable under irrigated conditions.
Price instability may in fact be
lower than in rainfed areas but my
finding refers to the relative
importance of price versus yield
instability for each environment.

34
Appendix 1. Names of rainfed and irrigated districts.

District State Rainfed (RF) Yield (kg ha-1) % rice

/irrigated (1 966-93) irrigation
(1 994-95)

Dhanbad Bihar RF 1,355 (435) 0

Hazaribagh Bihar RF 1,253 (374) 0.9
Ranchi Bihar RF 1,082 (227) 2.0
Singbhum Bihar RF 1,342 (291) 2.7
Santhal Bihar RF 1,512 (371) 4.4
Saran Bihar RF 1,311 (389) 4.9
Muzafarpur Bihar RF 1,111 (279) 8.4
Darbhanga Bihar RF 1,209 (297) 9.3
Purnea Bihar RF 1.156 (303) 18.5
Saharsa Bihar RF 1,209 (218) 30.9
Chapmapran Bihar RF 1,453 (380) 36.0
Palarnau Bihar RF 997 (512) 40.0
Munghyr Bihar Irrigated 1,458 (444) 49.8
Bhagalpur Bihar Irrigated 1,642 (418) 70.2
Gaya Bihar Irrigated 1,564 (498) 85.4
Shahbad Bihar Irrigated 1,858 (570) 96.8
Patna Bihar Irrigated 1,830 (558) 100
Betul Madhya Pradesh RF 1,262 (305) 0
Chatarpur Madhya Pradesh RF 973 (345) 0
Chindwara Madhya Pradesh RF 1,000 (338) 0
Datia Madhya Pradesh RF 764 (265) 0
Dhar Madhya Pradesh RF 748 (1 98) 0
Gunna Madhya Pradesh RF 864 (250) 0
lndore Madhya Pradesh RF 777 (315) 0
Narsinghpur Madhya Pradesh RF 1,458 (448) 0
Raisen Madhya Pradesh RF 914 (268) 0
Sehore Madhya Pradesh RF 923 (214) 0
Tikamgarh Madhya Pradesh RF 844 (279) 0
Vidisha Madhya Pradesh RF 888 (264) 0
Jhabua Madhya Pradesh RF 571 (230) 0.1
Sagar Madhya Pradesh RF 905 (256) 0.1
Satna Madhya Pradesh RF 611 (141) 0.1
Khandwa Madhya Pradesh RF 1,220 (323) 0.2
Ratlam Madhya Pradesh RF 655 (239) 0.3
Shahadol Madhya Pradesh RF 955 (271) 0.3
Surguja Madhya Pradesh RF 1,047 (305) 1.3
Sidhi Madhya Pradesh RF 695 (173) 1.8
Madla Madhya Pradesh RF 915 (209) 2.5
Shajapur Madhya Pradesh RF 818 (202) 2.5
Khargone Madhya Pradesh RF 686 (179) 2.8
Bastar Madhya Pradesh RF 1.236 (279) 3.5
Panna Madhya Pradesh RF 711 (206) 3.6
Rewa Madhya Pradesh RF 736 (215) 3.6
Hoshangabad Madhya Pradesh RF 1,480 (398) 6.2
Raigarh Madhya Pradesh RF 845 (255) 6.5
Rajgarh Madhya Pradesh RF 1,271 (270) 6.5
Damoh Madhya Pradesh RF 932 (203) 7.6
Jabalpur Madhya Pradesh RF 794 (335) 8.1
Shivpuri Madhya Pradesh RF 1.280 (388) 9.5
Seoni Madhya Pradesh RF 1,520 (497) 19.6
Bilaspur Madhya Pradesh RF 1,417 (452) 33.7
Durg Madhya Pradesh Irrigated 1,242 (332) 40.2
Raipur Madhya Pradesh Irrigated 1,562 (491) 47.3
Balaghat Madhya Pradesh Irrigated 1,529 (398) 50.6
Morena Madhya Pradesh Irrigated 2,012 (750) 97.1
Gwalior Madhya Pradesh Irrigated 3,605 (862) 99.9
Bhind Madhya Pradesh Irrigated 2,123 (639) 100.0
Kalahandi Orissa RF 1,762 (364) 15.6
Mayurbhanj Orissa RF 1,986 (371) 22.3
Sundargarh Orissa RF 1.718 (291) 22.3
Keonjar Orissa RF 1,844 (314) 23.5
Dhenkanal Orissa RF 1,935 (494) 25.2
Koraput Orissa RF 2.103 (405) 30.7
Bolangir Orissa RF 2,065 (392) 36.7
Phulbhani Orissa Irrigated 2,035 (586) 41.5
Balasore Orissa Irrigated 1,995 (406) 47.4

35
 Sambalpur Orissa Irrigated 2,394 (735) 48.7
Cuttack Orissa Irrigated 2,255 (41 7) 50.9
Puri Orissa irrigated 2,358 (397) 53.0
Ganjam Orissa Irrigated 2,448 (655) 82.2
Basti Uttar Pradesh RF 1,377 (441) 0.1
Gonda Uttar Pradesh RF 1,338 (502) 0.2
Gorakhpur Uttar Pradesh RF 1,736 (723) 0.3
Bahraich Uttar Pradesh RF 1,139 (503) 0.5
Pratapaganj Uttar Pradesh RF 1,550 (624) 2.1
Jhansi Uttar Pradesh RF 735 (244) 3.0
Sitapur Uttar Pradesh RF 1,298 (520) 7.2
Sultanpur Uttar Pradesh RF 1,538 (636) 9.7
Hamirpur Uttar Pradesh RF 950 (361) 10.1
Azamgarh Uttar Pradesh RF 1,441 (720) 11.7
Chamoli Uttar Pradesh RF 1,833 (183) 12.8
Agra Uttar Pradesh RF 1,758 (512) 15.0
Balia Uttar Pradesh RF 1,452 (692) 21.7
Deoria Uttar Pradesh RF 1,889 (811) 22.0
Faizabad Uttar Pradesh RF 1,847 (780) 23.9
Budaun Uttar Pradesh RF 1,729 (497) 27.5
Shahjahanpur Uttar Pradesh RF 2,085 (911) 27.8
Furukabad Uttar Pradesh Irrigated 1,729 (659) 43.7
Kheri Uttar Pradesh Irrigated 1,814 (870) 45.6
Varanasi Uttar Pradesh Irrigated 1,821 (700) 47.2
Hardoi Uttar Pradesh Irrigated 1,652 (700) 48.2
Jaunpur Uttar Pradesh irrigated 1,606 (752) 49.9
Ghazipur Uttar Pradesh Irrigated 1,571 (753) 53.9
Barbanki Uttar Pradesh Irrigated 1,939 (683) 55.7
Mathura Uttar Pradesh Irrigated 1,879 (700) 56.8
Etah Uttar Pradesh Irrigated 1,703 (553) 60.2
Mainpur Uttar Pradesh irrigated 1,785 (603) 61.2
Allahabad Uttar Pradesh Irrigated 1,647 (630) 67.9
Meerut Uttar Pradesh Irrigated 2,058 (768) 69.3
Bereily Uttar Pradesh Irrigated 2,062 (744) 69.6
Saharanpur Uttar Pradesh Irrigated 2,365 (764) 71.6
Lucknow Uttar Pradesh Irrigated 1,642 (555) 72.6
Muzafarnagar Uttar Pradesh Irrigated 1,767 (415) 72.8
Moradabad Uttar Pradesh Irrigated 2,056 (926) 74.9
Bijnore Uttar Pradesh irrigated 2,277 (1,052) 75.0
Dehradun Uttar Pradesh Irrigated 1,915 (502) 75.3
Buiandsahr Uttar Pradesh Irrigated 1,865 (547) 76.8
Kanpur Uttar Pradesh Irrigated 1,905 (705) 79.7
Etawah Uttar Pradesh Irrigated 1,974 (674) 90.4
Banda Uttar Pradesh Irrigated 1,189 (329) 93.4
Aligarh Uttar Pradesh Irrigated 1,736 (627) 100
Jalaun Uttar Pradesh irrigated 967 (4 15) 100
24 Pargana WB RF 1,998 (518) 24.7
Bankura WB Irrigated 2,239 (542) 59.2
Burdwan WB Irrigated 2,477 (568) 64.9
Coochbihar WB RF 2,709 (698) 0.23
Darjeeling WB RF 1,497 (238) 0
Hoogly WB RF 2,542 (617) 38.5
Howrah WB RF 2,053 (647) 5.8
Jalphaiguri WB RF 1,485 (21 5) 2.1
Malda WB RF 1,933 (533) 23.4
Midnapore WB RF 2,000 (532) 21.0
Murshidabad WB RF 2,088 (647) 11.5
Nadia WB Irrigated 2,173 (874) 49.7
Purulia WB RF 1,792 (408) 6.1
West Dinajpur WB RF 1,674 (398) 9.5

Summary statistics of number of rainfed and irrigated districts

No. of rainfed districts No. of irrigated districts

MP 35 7
Orissa 8 6
West Bengal 11 3
Bihar 12 5
UP 25 18

(Figures in parentheses are standard deviations)

36
Notes

Acknowledgment: This paper benefits from the

insightful comments and suggestions from
several peers. I gratefully acknowledge their
help. I am particularly grateful to Dr. Sushil
Pandey, agricultural economist and deputy
head, Social Sciences Division, IRRI,
Philippines; Dr. Dayanatha Jha, former
director, NCAP, New Delhi; and Dr. A.
Janaiah, IRRI, Philippines.
Author’s address: International Rice Research
Institute, MCPO Box 3127, Makati City
1271, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

37
Labor use and employment pattern in rainfed rice-
producing states of India
G.K. Chadha

This paper looks into the role of employment as a strategy for managing risk in rainfed
agriculture. Specifically, it analyzes employment patterns, seasonal adjustments in work
patterns, production in and outside the homestead, on-farm diversification, sectoral patterns
of employment, farm and nonfarm components of employment, hired workers in the farm/
nonfarm sector, and the position of female workers. Unstable and low yield/productivity is the
main problem facing most of the eastern states of India. The noncrop sector is still a tiny
fraction of the total rural economy. The inherent weaknesses of the nonfarm sector, especially
rural manufacturing, are also no less daunting; in some of these states, nonfarm earnings per
worker are extremely low. On the employment side, much of the work force is still confined to
agriculture. Employment under the unstable production regime of this sector is not only
undependable but also much less remunerative. People work hard but they do not have
enough earnings. The proportion of the work force engaged in nonfarm activities is low. Part-
time employment is a common practice among the female workers of this region. The paper
concludes with the suggestion that more responsive and supportive institutional environments
are needed so that farmers can manage agricultural risk better through diversification of
employment. Such a strategy will also directly contribute to the overall growth of the rural
economy.

Uncertainty in production and earning stands out
as the most crippling element of rainfed
agriculture. Farmers, especially ones with a
small land area, may exercise their best wisdom
in sketching out an area allocation plan,
following the input-use pattern, pursuing the
recommended field crop practices, observing
timeliness, and so on. Yet, low and highly
fluctuating rainfall, on a season-to-season or
intraseason basis, often imposes upon them
suboptimal production and postproduction
choices (Singh 1978). For example, farmers may
allocate more of their labor to those months that
promise them higher on-farm earnings. In the
dry months, they are forced to put more efforts
into nonfarm activities in and around their
village. Again. during a particular cropping
season, there may be inadequate rainfall or rains
may come much in excess of the normal, and
farmers are suddenly obliged to make
contingency production plans, bringing them
much lower earnings than what they would have
reaped had the original plan succeeded. Yet
again, farmers may put their eggs in different
baskets, in as much as they have learned that the
“risk of starvation” can be averted if income-
generating efforts are spread over diverse
activities. Quite often, small and marginal farm
households are seen to be engaged in a long
chain of “self-employing” on-farm activities.
Other times, their production and employment
plans inside the homestead differ starkly from
those outside when we move from one cropping
season to another. In other words, they are
advised to continue much more with their
homestead economy during the season that
promises them higher monetary returns, and
branch out to nonhomestead employment
avenues when it is no longer “profitable” to stay
inside (Thorat 1993).
In brief, different production and
employment strategies are followed to ward off

39
 the risk of low production, low employment, low
earning, deprivation, poverty, and so on. A
multipronged involvement in the labor market is
thus an inescapable reality for a small farm
producer in rainfed agriculture, retaining the
eventuality of occasional asset liquidation or
migration. In many cases, institutional guidance
and support may be available to individual
farmers in rainfed agriculture, yet, in the
ultimate analysis, farmers' own efforts in
grappling with unwanted weather-induced
contingencies are what decide the level of their
earnings and consumption year-round.
This paper looks into the employment
patterns of rural households in 10 rainfed rice-
producing eastern states of India. The chosen
states are Arunachal Pradesh, Assam, Bihar,
Manipur, Meghalaya, Mizoram, Nagaland,
Orissa, Tripura, and West Bengal. Although
rainfed rice systems prevail in some other states
as well (e.g., Kerala, Madhya Pradesh, Uttar
Pradesh, Maharashtra, Rajasthan), these states
are not included primarily because rice
cultivation does not occupy a prominent place in
the farming economy of some of these states
(such as Rajasthan) or, more expressly, in their
cereal economy (such as Madhya Pradesh and
Maharashtra). The extreme preponderance of
rice in the total cereal economy of our chosen
states stands out as the single most weighty
consideration for more risky farming in these
states.
Based on secondary published data, I
attempt to see how farmers in the 10 eastern
states use employment strategies that alternate
markedly between one cropping season and the
other, that show changing priorities between
homestead and outside production and
employment plans, and that show their
inescapable dependence on nonfarm
employment. All these aim to augment their
limited and risk-prone income from farming.
The paper is divided into six parts. Part I defines
the problem; Part II describes the agrarian
background of the study areas; and part III looks
into work and employment patterns, seasonal
adjustments in work patterns, production in and
outside the homestead, on-farm diversification,
sectoral patterns of employment, farm and
40
nonfarm components of employment, major
sources of nonfarm employment, the share of
rural areas in nonfarm employment, hired
workers in the farm/nonfarm sector, and the
position of female workers. Parts IV and V give
rough clues on land and labor productivity in
and outside agriculture, respectively. Finally,
part VI makes a few concluding comments.
Although an effort is made to obtain facts
and figures relating to agriculture and to
nonagricultural economies for all 10 eastern
states, usable data in some cases are missing
(e.g., those for Arunachal Pradesh and
Mizoram). Thus, data from only eight states
were used. Moreover, the many indicators used
are rough approximations only. Because of time
and data constraints, temporal changes could not
be looked into. Statistical techniques are
consciously avoided at this stage because the
paper aims only to provide preliminary insights
into the employment patterns in these states,
emanating from and connected as they are with
the unstable agricultural base of their economies.
Finally, I believe that the production structures
and employment patterns in these areas,
influenced as they are by the local agrarian
institutions, are also highly conditioned by their
physical environment. Again, gender differences
here are perhaps of a different kind. I cannot
accommodate all these elements in a single
paper. Nevertheless, I must, at least, take note of
a few specific physical and agrarian features of
the states chosen (see Tables 1, 2, and 3).
Agrarian background
Most of the eastern states are high or very high
rainfall areas compared with the rest of India
(Table 1). In particular, the number of rainy days
per year puts them in an entirely different
physical setting. The production environment in
Nagaland, Meghalaya, or Manipur, because of
the excessively long rainy season, is strikingly
different from that in many other rice-producing
regions with a smaller number of rainy days per
year (such as Andhra Pradesh. Haryana, Punjab.
Tamil Nadu). Again, in terms of irrigation
development, the rice-producing eastern states
are far behind. The stark contrast is reflected in
Table 1. Rainfall and other relevant information on the rice economy of India.

Av rainfall Coefficient Rainy days Rainfed Rice area Net area

State (mm)a of variation per year rice area (% of total irrigated
(%)a (no.). (% of total area under (% of net
rice area)b cereals)b sown area)b

Andhra Pradesh 879 19.0 49.4 3.0 66.7 38.5

Assam 2,207 8.5 104.2 78.9 96.0 21.1
Bihar 1,272 12.5 60.8 64.2 61.2 46.7
Gujarat 833 32.0 36.7 41.1 19.3 27.6
Haryana 722 28.0 31.7 6.5 22.0 75.6
Himachal Pradesh 1,723 16.0 65.0 38.0 10.0 17.3
Jammu-Kashmir 995 16.0 55.0 9.2 32.0 42.6
Karnataka 1,355 15.0 67.8 37.8 25.3 20.3
Kerala 2,996 12.0 126.0 58.6 98.3 14.9
Madhya Pradesh 1,215 16.0 57.3 76.1 39.9 24.4
Maharashtra 1,314 25.0c 58.6 73.7 14.4 14.9
Manipur 2,389 - 122.5 54.0 98.4 32.8
Meghalaya 2.773 - 123.0 57.0 81.2 22.4
Nagaland 2,378 - 132.3 74.0 78.0 29.4
Orissa 1,482 11.0 72.3 66.2 94.8 46.4
Punjabd 625 26.0 31.7 5.6 37.8 92.3
Rajasthan 588 42.0e 28.9 63.8 1.7 26.4
Tamil Nadu 1,008 114.0 53.5 13.2 66.0 46.4
Tripura 2,101 - 99.1 81.4 97.0 13.1
Uttar Pradesh 985 18.5 45.8 45.0 30.7 65.8
West Bengal 1,645 13.0 75.3 73.1 93.6 34.8
All India - - - 52.4 42.2 35.3

aGovt. of India, Monthly and Annual Normals of Rainfall and Rainy Days; based on records from 1901 to 1950. Govt. of India Press. p 65,68-73.
bGovt. of India. Statistical Abstract. India 1992, CSO, Sep 1994. p 41. cCoeffiient of variation is given for the Marathwada region of Maharashtra
to highlight the seriousness of the rainfall variability problem in the state. dGovt. of Punjab. Statistical Abstract. Punjab 1996, ESO. March 1997. p
152-163. eFor the same reason, it is given for West Rajasthan (in preference to the eastern part of the state).

Table 2. irrigated net operated area, irrigated and nonirrigated sown area, and area under current fallow by state and
kharif/rabi seasons, 1992 NSS data.

Irrigated net sown area Nonirrigated net sown area Area under current fallow
State (% of net operated area) (YO of net operated area) (% of net operated area)

Kharif Rabi Kharif Rabi Kharif Rabi

Andhra Pradesh 38.5 38.1 52.1 23.1 3.6 32.7

Assam 6.2 3.6 72.5 53.3 2.7 26.0
Bihar 43.9 60.3 45.5 29.8 0.9 1.5
Gujarat 35.4 59.5 57.9 10.8 2.1 24.7
Haryana 76.2 77.0 8.2 9.1 2.8 10.6

Himachal Pradesh 11.7 13.2 64.0 66.8 0.5 0.8

Jammu-Kashmir 23.6 23.1 61.0 50.6 0.2 10.9
Karnatak 17.5 26.1 70.7 44.8 8.0 20.2
Kerala 21.3 16.8 67.0 65.4 1.0 6.2
Madhya Pradesh 22.5 35.7 67.2 42.1 6.7 17.8
Maharashtra 60.1 34.7 18.6 28.8 4.3 21.5
Manipur 29.9 7.0 52.2 34.4 0.8 38.8
Meghalaya 0.4 0.5 89.2 82.4 0.8 7.9
Nagaland 0.6 0.0 86.7 62.1 4.0 22.8
Orissa 16.4 27.3 76.9 28.6 0.8 37.0
Punjab 87.2 87.7 6.8 6.7 0.2 0.0
Rajasthan 22.8 35.5 53.4 18.8 15.0 39.6
Tamil Nadu 50.8 37.5 36.5 22.1 4.3 31.7
Tripura 23.3 33.5 36.6 28.6 5.2 4.3
Uttar Pradesh 70.0 73.0 15.0 15.3 8.1 5.7
West Bengal 41.6 51.8 44.5 8.3 1.1 26.7
All India 35.7 47.2 49.8 25.6 5.8 19.5

Source: Govt. of India (1997g).

41
Table 3. Agrarian structure in Indian states, 1992 NSS data.

State Percentage share of Percentage share of Percentage of operated No. of

holdings operated area area leased by parcels per
holding
SMRa SMR + SMR + SMR SMR + SMR + SMR MRG SML All
MRGb MRG + MRG MRG +
SMLc SML

Andhra Pradesh 29.1 58.4 79.8 2.9 17.5 40.9 9.2 11.5 10.2 9.6 2.5
Assam 34.9 69.8 89.8 0.9 16.1 47.3 8.5 6.3 8.7 7.0 1.8
Bihar 46.8 71.5 96.6 8.3 29.0 54.2 7.3 5.3 5.5 6.2 2.8
Gujarat 22.0 43.2 63.1 1.3 8.5 22.3 5.5 1.8 1.7 2.9 1.9
Haryana 30.2 45.8 59.3 0.8 16.4 25.2 1.3 8.4 9.1 6.5 1.9
Himachal Pradesh 41.4 76.1 88.4 12.0 41.4 63.9 5.5 5.9 5.8 5.8 4.0
Jammu-Kashmir 23.4 58.2 85.0 3.7 24.9 59.5 4.1 2.8 5.6 3.2 2.6
Karnatak 24.4 48.3 68.6 1.1 9.6 25.0 4.0 6.0 7.6 5.4 1.9
Kerala 74.5 90.9 96.8 23.3 53.2 76.6 2.9 1.2 3.8 2.1 1.4
Madhya Pradesh 14.0 33.8 68.2 0.7 6.7 22.3 5.0 8.6 7.5 7.8 3.0
Maharashtra 19.6 39.3 58.2 0.8 6.7 18.4 4.0 3.1 3.0 3.3 2.4
Manipur 25.7 62.5 82.6 5.4 37.5 72.7 1.0 6.8 13.3 5.2 1.0
Meghalaya 21.8 65.4 83.6 4.6 38.7 67.5 4.6 9.9 6.7 8.7 1.8
Nagaland 8.9 55.9 86.5 2.0 32.6 72.7 1.0 0.8 0.4 0.7 2.1
Orissa 27.6 59.7 84.0 3.9 22.2 52.3 7.4 13.0 14.4 11.0 3.1
Punjab 48.7 59.8 71.2 1.2 6.2 16.9 13.9 18.7 11.7 17.3 2.0
Rajasthan 17.2 38.1 58.0 0.8 5.6 14.9 1.7 8.0 2.8 6.5 3.2
Tamil Nadu 62.1 76.6 89.7 7.6 28.9 57.0 12.1 9.9 10.9 10.8 2.1
Tripura 47.2 78.9 90.8 13.9 52.9 83.9 5.2 5.1 8.4 5.1 1.5
Uttar Pradesh 36.2 66.2 84.7 5.4 24.9 51.3 9.9 11.9 14.4 11.2 3.1
West Bengal 52.8 78.9 92.3 11.8 39.9 70.6 15.4 11.5 12.1 13.2 3.7
All India 35.1 60.2 78.0 3.3 15.6 34.3 8.6 8.7 8.5 8.7 2.7
a b
Holdings with operated area between 0.002 and 0.40 ha are defined as submarginal (SMR). Those with operated area between 0.41 and 1.00 ha
are marginal (MRG). c Those with area between 1.01 and 2.00 ha are small holdings (SML).
Source: Govt. of India (1997c).

the rainfed rice-cropped area as a percentage of
total area under rice and, still more so, in terms
of the importance of rice in the total cereal
economy. In Manipur, Tripura, Assam, Orissa,
and West Bengal, rice alone accounts for nearly
95 % of the total area under cereal crops. In
brief, a very high incidence of rainfed rice
cultivation on the one hand, and the heavy year-
round dependence on rice on the other, leave the
chosen states vulnerable. Low yields are
therefore a natural consequence. Later, in Table
11, data will compare the poor performance of
most of the chosen states in rice yield with that
of other traditional rice-growing states such as
Andhra Pradesh, Tamil Nadu, and Karnataka.
leaving aside startling gaps with respect to the
Green Revolution areas of Punjab and Haryana.
Table 2 shows greater interseasonal
variation in irrigation endowment in the eight
states. Against a perfectly stable irrigation base
in Punjab and Haryana and a highly stable base
in Andhra Pradesh, Himachal Pradesh, Jammu-
Kashmir, Kerala, and Uttar Pradesh, the highly
fluctuating irrigation base is clearly discernible
in Assam, Bihar, Manipur, Orissa, Tripura, and
West Bengal. In most Indian states, current
fallow is much higher in the rabi cropping
season than in kharif. The rainfed rice-producing
eastern states show this trait a bit more sharply.
Table 3 informs us about a few important
agrarian features of the Indian states. Without
doubt, there is a pronounced concentration of
submarginal. marginal, and small farms in most
of them. Their concentration is all the more
pronounced in the eastern states. For example,
such holdings make up 97% of the total holdings
in Bihar. 92% in West Bengal, 90% in Assam,
and 80% and above in other eastern states. The
inherent weaknesses of agriculture in our chosen
states, especially in the context of a mismatch
between small land area and technological
compulsion of the modem farming system, need
to be appreciated. In other words, farming on a
fairly submntial proportion of an operated area
(e.g., 84% in Tripura; more than 70.0% in West
Bengal, Nagaland, and Mmnipur; about two-
thirds in Meghalay; etc.) is "doomed" to be
carried out under a "subsistence farming
regime," largely untouched by technological
advances and characterized by up-and-down

42
swings in employment and earnings of a large
number of rural households.
Work patterns and employment
Production in and outside the
homestead
A typical feature of Indian agriculture is that
most of the farmers combine production
enterprises in and around their homestead with
work outside the homestead. Work outside the
homestead involves various activities, such as
self-employment in cultivation, wage
employment on others’ farms, or a mix of
employment types in a wide array of nonfarm
activities in and outside the village. For
households with a small land area, a scattered
pattern of work is a natural phenomenon since
any bit of additional earning from whatever
source would mitigate the acute economic
distress under which they live. In as much as the
production and employment uncertainty looms
larger during dry months, farmers would rather
concentrate their production and self-
employment efforts inside the homestead. They
will then seek employment/production
opportunities outside the homestead when the
rainy season starts. Table 4 clearly confirms
these interseasonal production and work
adjustments.
The inside-outside homestead division of
production and employment efforts varies
greatly between the rainy season and rabi season
(usually dry season) in most of the states,
practically all along the farm size continuum. In
Punjab and Haryana, dependence on homestead
production/employment is practically nil during
rabi and very marginal during kharif. An
exception is the tiny farm that has to use its
homestead production base largely because there
is little land to till. The kharif-rabi differences
are rather mild in other states (e.g., Andhra
Pradesh, Tamil Nadu, Uttar Pradesh) where
irrigation development is of a medium order.
The eastern states of Bihar and West Bengal are
medium irrigation areas. In most eastern states
1
The recent setbacks in Punjab agriculture, brought about by excessive and untimely rains, do not come in the
way of our analysis.
with a low irrigation base, the kharif-rabi
difference between homestead and outside
production is not sharp but persists consistently
across all farm sizes. For example, in Orissa,
while only 11% of operational holdings continue
with homestead production during kharif, this
percentage goes up to 26.4 during rabi. In
Manipur, the kharif-rabi percentages are 32.7
and 59.1; in Meghalaya, they are 15.6 and 24.3;
and in Nagaland, 6.8 and 15.0. For obvious
reasons, on smaller farms, the kharif-rabi
difference is particularly high. Farmers in this
situation have to observe more sweeping
interseasonal production/work adjustments. In
any case, the greater flexibility in dividing
production/employment efforts between the
homestead and outside locales is an
unmistakable agrarian feature and a survival
strategy followed by farmers in the rainfed rice
areas of India.
On-farm diversification
Farmers in rainfed agriculture have a much more
diversified on-farm pattern of production/
employment. This is particularly the case for the
rabi cropping season, which generally consists
of dry months in the yearly production cycle
(Table 5).
In Punjab and Haryana, states which ex-
perienced Green Revolution in 60’S, the whole
production regime is dominated by two activi-
ties: crop and livestock production, although
there are several noncrop activities such as
vegetable production, horticulture, poultry, and
miscellaneous enterprises. This is not surprising
because the states have a fairly stable (and
expanding) base of grain production and their
farmers are not exposed much to seasonal yield
variation and production and earning
uncertainties of the kind suffered by rainfed
farmers. The most profitable activity is raising
livestock. The wheat-rice combination,
supplemented by livestock enterprises (mostly
milk and allied products), has been their most
profitable on-farm choice.’ Livestock
supplements crop production in many other
43
Table 4. Seasonal distribution (%) of operational holdings reporting different types of agricultural and related production by state and farm size, 1992 NSS data.

Tiny farms SMR farms MRG farms SML farms Med. farms All farms

State Season Inside Outside Inside Outside Inside Outside Inside Outside Inside Outside Inside Outside
home- home- home- home- home- home- home- home- home- home- home- home-
stead stead stead stead stead stead stead stead stead stead stead stead
only only only only only only

Andhra Pradesh Kharif 58.8 41.2 3.8 96.2 4.0 96.0 4.4 95.6 4.0 96.0 14.6 85.4
Rabi 72.7 27.3 16.3 83.7 11.9 88. 10.4 89.6 4.8 95.2 28.4 71.6
Assam Kharif 73.3 26.7 38.1 61.9 16.5 83.5 17.9 82.1 11.9 88.1 33.6 66.4
Rabi 74.3 25.7 34.5 65.5 18.1 81.9 14.4 85.6 8.8 91.2 35.4 64.6
Bihar Kharif 43.6 56.4 18.7 81.3 20.4 79.6 21.5 78.5 13.9 86.1 29.4 70.6
Rabi 35.5 64.5 7.0 93.0 4.8 95.2 3.8 96.2 0.8 99.2 17.8 82.2
Gujarat Kharif 59.7 40.3 3.7 96.3 2.9 97.1 3.1 69.9 5.5 94.5 16.7 83.3
Rabi 83.1 16.9 100.0 3.8 96.1 9.1 90.9 13.5 86.5 33.9 66.1
Haryana Kharif 66.9 33.1 14.2 85.8 100.0 5.2 94.8 6.1 93.9 22.0 78.0
Rabi 77.9 22.1 100.0 100.0 100.0 100.0 22.3 77.7
Himachal Pradesh Kharif 4.7 95.3 2.5 97.5 4.5 95.5 0.7 99.3 1.0 99.0 3.5 96.5
Rabi 0.9 99.1 100.0 0.8 99.2 0.1 99.9 0.9 99.1 0.6 99.4
Jammu-Kashmir Kharif 54.8 45.2 2.2 97.8 1.9 98.1 0.6 99.4 100.0 8.8 91.2
Rabi 45.2 54.8 5.3 94.7 10.7 89.3 7.7 92.3 4.9 95.1 12.8 87.2
Karnatak Kharif 68.5 31.5 2.4 97.6 2.0 98.0 3.5 96.5 5.5 94.5 16.9 83.1
Rabi 81.4 18.6 9.5 90.5 12.5 87.5 10.9 89.1 4.8 95.2 41.3 58.7
Kerala Kharif 37.3 62.7 7.3 92.7 0.2 99.8 1.4 98.6 0.8 99.2 24.5 75.5
Rabi 33.2 66.8 6.7 93.3 1.3 98.7 2.6 97.4 3.5 96.5 22.3 77.7
Madhya Pradesh Kharif 67.3 32.7 4.3 95.7 2.2 97.8 4.4 95.6 3.2 96.8 16.4 83.6
Rabi 65.7 34.3 8.3 91.7 4.4 95.6 4.8 95.2 7.1 92.9 24.0 76.0
Maharashtra Kharif 72.1 27.9 0.6 99.4 0.6 99.4 0.6 99.4 0.3 99.7 16.1 83.9
Rabi 88.1 11.9 0.7 99.3 1.5 98.5 6.5 93.5 5.4 94.6 44.6 55.4
Manipur Kharif 44.9 55.1 29.7 70.3 32.3 67.7 22.9 77.1 34.3 65.7 32.7 67.3
Rabi 62.9 37.1 46.0 54.0 57.9 42.1 50.0 50.0 100.0 59.1 40.9
Meghalaya Kharif 52.0 48.0 14.4 85.6 4.6 95.4 7.8 92.2 2.9 97.1 15.6 84.4
Rabi 55.2 44.8 18.2 81.8 6.9 93.1 8.8 91.2 7.4 92.6 24.3 75.7
Nagaland Kharif 71.1 28.9 4.1 95.9 1.7 98.3 2.6 97.4 100.0 6.8 93.2
Rabi 41.8 58.2 10.7 89.3 2.2 97.8 1.0 99.0 100.0 15.0 85.0
Orissa Kharif 41.4 58.6 3.9 96.1 3.3 96.7 2.2 97.8 4.8 95.2 10.8 89.2
Rabi 61.3 38.7 8.2 91.8 7.4 92.6 9.1 90.9 5.8 94.2 26.4 73.6
Punjab Kharif 72.9 27.1 14.4 85.6 8.9 91.1 9.4 90.6 5.8 94.2 35.8 64.2
Rabi 76.8 23.2 6.4 93.6 100.0 100.0 100.0 37.2 62.8
Rajasthan Kharif 68.9 31.1 8.8 91.2 3.2 96.8 4.1 95.9 4.3 95.7 11.3 88.7
Rabi 70.6 29.4 4.7 95.3 5.9 94.1 8.9 91.1 16.7 83.3 28.2 71.8
 states as well (e.g., Andhra Pradesh, Gujarat,
Jammu-Kashmir, Karnataka, Madhya Pradesh,
Maharashtra, Rajasthan, Tamil Nadu, and Uttar
Pradesh), though at a scale much lower than that
in the Green Revolution states. In most of the
rainfed rice- producing eastern states, livestock
is less noticeable; the situation in Assam,
Manipur, Meghalaya, and Nagaland merits
particular attention. Thriving livestock
enterprises depend quite heavily on timely
access to and adequate availability of grains. In
these eastern states, the uncertainty present in
grain production may deter farmers from
engaging in this grain-dependent business. They
do not, however, sit back helplessly. Vegetable
cultivation figures quite prominently in a way
(though not on the same scale) that livestock
does in the Green Revolution areas. As noted
earlier in Table 4, dependence on homestead
production/employment is much more evident in
the rainfed rice-producing eastern states, and it
now becomes obvious that vegetable cultivation
and poultry (and, to a limited extent, livestock)
are the natural choices for the homestead
economy in these areas. Thus, farmers in these
states pursue a much wider range of production
activities compared with their counterparts in
other states, especially those with an assured
means of irrigation.
The tendency to operate in diverse
production lines manifests itself in all states,
among all farm size categories and in both kharif
and rabi seasons. The degree varies across the
board. The necessity for supplementation is felt
most acutely by those who have very little land
base to operate on, and it declines as we move
up the farm size continuum. It is no wonder,
therefore, that tiny farms have the most
diversified on-farm production base. For
example, in Assam, just about one-fourth of the
tiny farms are engaged in crop production during
the rabi season, while as many as 55.0% are
engaged in vegetable cultivation, 6.0% in
livestock, 2.4% in poultry, 2.1% in horticulture,
and 8.59% in miscellaneous enterprises. In
Manipur, Meghalaya. Orissa, and West Bengal,
the tiny farms are more dispersed between crop
and noncrop enterprises. A similar pattern
prevails during the kharif cropping season.

45
Table 5. Seasonal onfarm diversification of production activities by state and main activity, 1992 NSS data.

Percentage distribution of operational holdings by activity type

State Season Holding Crop Vegetable Horti- Plantation Livestock Poultry Others
type production production culture

Andhra Pradesh Kharif Tiny 40.1 8.0 0.5 5.2 26.7 13.4 6.1
SMR 91.3 1.9 0.7 1.6 3.4 1.1
MRG 93.6 0.4 1.2 1.9 2.3 0.6
SML 94.4 0.3 0.7 0.7 2.8 0.9 0.2
Med. 94.7 0.2 0.5 1.8 2.6 0.2
ALL 83.4 2.1 0.7 2.1 7.2 2.9 1.6
Rabi Tiny 30.1 5.6 3.1 41.3 11.3 8.6
SMR 72.3 0.7 4.2 16.2 3.7 2.9
MRG 81.6 2.4 1.5 0.7 7.2 5.4 1.2
SML 85.6 2.1 0.8 1.5 9.6 0.4 0.1
Med. 89.3 0.3 1.8 2.1 6.0 0.1 0.4
ALL 67.4 2.9 0.6 2.4 18.3 5.2 3.2
Assam Kharif Tiny 28.9 37.6 4.1 7.0 6.9 15.5
SMR 70.7 16.3 2.6 3.0 2.4 1.5 2.5
MRG 86.1 5.4 0.7 0.6 1.8 0.7 5.7
SML 91.5 3.8 0.4 1.8 2.4
Med. 91.6 0.5 0.5 1.9 0.2 5.3
ALL 71.5 13.7 0.8 2.0 3.0 2.2 6.8
Rabi Tiny 26.1 54.9 2.1 5.9 2.4 8.5
SMR 66.1 30.5 0.3 1.8 1.2
MRG 80.1 14.9 0.1 1.2 3.7
SML 89.6 9.6 0.2 0.6
Med. 93.2 5.0 1.1 0.8
ALL 64.5 27.6 0.8 0.8 1.6 0.7 4.0
Bihar Kharif Tiny 61.0 6.0 0.4 1.1 16.9 1.4 13.1
SMR 91.6 0.6 0.8 0.1 6.1 0.3 0.5
MRG 92.8 1.1 0.2 0.1 5.0 0.9
SML 90.0 1.7 0.4 0.1 6.0 1.4 0.5
Med. 89.9 1.0 0.6 0.2 7.1 0.5 0.5
ALL 79.3 2.6 0.5 0.5 10.5 0.8 6.0
Rabi Tiny 67.3 4.1 0.4 18.8 1.2 8.2
SMR 95.8 1.0 0.5 2.3 0.4
MRG 98.5 0.6 0.90
SML 96.7 1.5 1.60
Med. 99.2 0.5 0.1 0.20
ALL 84.3 2.3 0.1 0.10 9.1 0.5 3.6
Gujarat Kharif Tiny 32.2 1.6 0.9 57.5 1.5 6.4
SMR 86.8 2.0 10.5 0.8
MRG 95.0 0.6 0.10 3.0 1.3
SML 98.0 0.4 1.4 0.2
Med. 94.7 0.1 0.0 4.5 0.6
ALL 81.3 0.5 0.4 0.10 15.1 1.00 1.7
Rabi Tiny 23.2 1.3 1.2 74.2
SMR 89.9 7.2 2.3 0.7
MRG 95.1 0.0 1.1 3.8
SML 87.6 1.5 1.2 9.5 0.2
Med. 87.6 0.6 11.8
ALL 65.3 1.7 1.1 0.20 30.4 1.0 0.3
Haryana Kharif Tiny 11.5 86.3 2.2
SMR 79.0 6.9 14.2
MRG 94.4 0.0 4.3 1.40
SML 88.1 4.2 7.7
Med. 91.3 2.0 6.5 0.2
ALL 70.0 1.1 0.5 27.8 0.7
Rabi Tiny 7.8 1.7 86.9 3.6
SMR 94.3 5.70
MRG 100.0
SML 100.0
Med. 97.2 0.3 2.50
ALL 72.4 1.0 0.60 25.0 1.0
Himachal Pradesh Kharif Tiny 92.7 1.8 3.6 1.9
SMR 96.8 0.0 2.7 0.5
MRG 86.2 1.0 7.0 0.9 4.9
SML 91.1 0.5 6.7 1.7
Med. 98.6 0.0 0.7 0.7
ALL 92.2 0.8 4.4 0.2 2.4

46
Table 5 continued.

Percentage distribution of operational holdings by activity type

State Season Holding crop Vegetable Horti- Plantation Livestock Poultry Others
type production production culture

Rabi Tiny 93.3 1.3 3.4 1.6 0.3

SMR 96.6 0.1 3.3
MRG 94.3 0.4 5.3
SML 93.7 0.6 5.7
Med. 92.2 3.9 3.9
ALL 94.6 0.7 4.2 0.4 0.2
Jammu and Kashir Kharif Tiny 46.5 6.8 1.90 42.8 2.0
SMR 96.4 1.4 2.2 0.0
MRG 95.3 0.0 3.8 0.9
SML 97.8 0.8 1.4
Med. 98.6 0.0 1.4
ALL 89.6 1.6 0.3 8.0 0.5
Rabi Tiny 46.4 9.3 44.3
SMR 91.8 1.4 6.9
MRG 90.2 9.8
SML 90.8 9.2
Med. 94.3 5.7
ALL 85.3 1.5 13.2
Karnataka Kharif Tiny 26.0 5.9 2.0 10.6 44.5 8.9 2.2
SMR 71.9 4.5 8.3 10.7 4.6
MRG 84.3 2.0 1.8 3.3 5.1 3.5
SML 85.5 0.8 0.5 5.9 5.6 0.4 1.2
Med. 88.1 1.5 0.1 4.6 5.2 0.5
ALL 72.5 1.9 1.5 6.4 13.7 1.9 2.1
Rabi Tiny 20.5 4.4 0.6 5.8 59.0 4.5 5.3
SMR 57.9 8.4 7.2 12.5 14.1
MRG 67.1 2.3 16.0 13.5 1.1
SML 64.9 2.8 3.8 15.6 11.3 1.5
Med. 84.8 9.9 4.9 0.4
ALL 47.9 3.5 1.6 9.3 32.3 2.3 2.5
Kerala Kharif Tiny 24.6 3.9 14.1 32.4 5.7 6.6 12.9
SMR 26.4 3.9 61.9 4.3 0.7 2.8
MRG 29.3 8.3 60.0 1.7 0.4 0.4
SML 24.9 0.3 6.9 65.4 2.3 0.3
Med. 30.6 1.5 66.6 1.3
ALL 25.5 2.4 10.8 43.7 4.7 4.3 8.6
Rabi Tiny 18.4 3.7 14.0 42.8 2.8 3.7 14.6
SMR 25.9 2.1 4.0 66.1 0.4 0.3 1.2
MRG 25.5 0.2 5.3 68.3 0.7
SML 23.9 6.7 69.2 0.2
Med. 29.5 4.0 66.5
ALL 21.0 2.7 10.7 51.7 1.9 2.4 9.7
Madhya Pradesh Kharif Tiny 28.0 9.4 41.4 12.4 8.8
SMR 90.0 1.2 0.8 6.8 1.2
MRG 93.5 1.0 1.1 3.8 0.6
SML 92.5 0.6 6.2 0.7
Med. 93.1 0.3 0.6 5.4 0.6
ALL 80.1 1.9 0.5 11.9 3.3 2.3
Rabi Tiny 38.6 7.9 0.9 0.8 34.7 0.9 16.2
SMR 91.1 3.7 1.8 3.5
MRG 92.7 0.7 5.6 0.9
SML 93.1 1.0 5.7 0.2
Med. 92.1 1.0 6.9
ALL 75.4 2.8 0.4 0.4 15.3 0.5 5.2
Maharashtra Kharif Tiny 27.6 4.6 0.1 53.4 11.5 2.7
SMR 99.5 0.5
MRG 98.9 1.1
SML 98.5 0.1 0.1 1.3
Med. 98.0 0.2 1.4 0.4
ALL 83.5 1.0 0.5 0.1 11.6 2.7 0.7
Rabi Tiny 11.5 4.0 0.4 0.2 74.3 9.4 0.3
SMR 94.8 2.6 1.0 0.9 0.7
MRG 91.7 2.7 0.8 3.7 1.2
SML 87.6 0.2 3.1 0.2 8.9
Med. 91.8 0.2 0.4 0.4 7.2
ALL 53.1 2.1 0.8 0.2 38.6 5.1 0.1

47
Table 5 continued.

Percentage distribution of operational holdings by activity type

State Season Holding Crop Vegetable Horti- Plantation Livestock Poultry Others
type production production culture

Manipur Kharif Tiny 19.6 57.8 1.4 2.9 4.8 13.6

SMR 82.7 8.9 1.9 6.5
MRG 70.9 16.2 7.0 4.3 1.6
SML 76.4 13.6 1.5 1.6 3.5 3.2
Med. 73.5 20.5 0.7 1.4 1.7 2.1
ALL 64.0 23.2 0.3 0.6 3.3 3.3 5.2
Rabi Tiny 20.9 61.6 0.9 0.4 8.4 3.6 4.2
SMR 29.3 59.5 11.2
MRG 93.7 4.4 1.9
SML 66.4 27.1 6.5
Med. 79.1 20.9
ALL 33.9 52.5 0.6 0.3 5.6 2.4 5.0
Meghalaya Kharif Tiny 40.4 21.4 10.3 5.7 9.5 10.2 2.5
SMR 54.4 22.1 11.8 2.1 2.9 1.6 5.1
MRG 83.9 8.3 4.0 0.2 1.o 2.5
SML 79.7 6.8 4.7 2.4 3.8 2.7
Med. 88.5 2.5 6.4 0.5 2.1
ALL 69.2 13.3 6.5 1.8 2.1 3.7 3.5
Rabi Tiny 12.3 56.7 8.6 2.1 9.2 6.1 5.0
SMR 32.3 37.3 21.0 2.0 1.8 2.1 3.6
MRG 36.8 52.2 7.1 0.4 1.4 2.1
SML 22.5 48.0 20.8 2.1 5.3 1.3
Med. 18.6 60.7 15.1 0.8 4.9
ALL 25.0 49.3 12.6 1.3 4.5 1.9 5.3
Nagaland Kharif Tiny 29.0 47.4 20.1 3.5
SMR 88.5 7.9 3.7
MRG 96.2 0.4 0.9 1.0 1.4
SML 97.4 1.0 1.7
Med. 93.4 6.6
ALL 90.8 4.0 0.9 0.5 2.7 1.1
Rabi Tiny 64.0 16.0 20.0
SMR 87.2 11.1 1.6
MRG 89.7 8.7 1.6
SML 89.8 10.2
Med. 95.8 4.2
ALL 82.3 11.4 6.3
Orissa Kharif Tiny 57.2 11.6 0.4 19.6 7.0 4.2
SMR 95.4 4.6
MRG 97.5 0.9 0.9 0.7
SML 96.8 1.1 1.8 0.3
Med. 98.2 0.5 1.4
ALL 89.3 2.7 0.30 5.5 1.3 0.9
Rabi Tiny 36.9 8.2 1.00 36.9 9.5 7.6
SMR 86.7 8.6 2.0 0.3 2.4
MRG 89.9 7.4 2.7
SML 89.9 6.3 2.2 0.9 0.8
Med. 94.2 4.8 1.0
ALL 71.3 7.5 0.4 14.3 3.4 3.2
Punjab Kharif Tiny 9.3 3.6 0.5 80.8 1.9 3.8
SMR 92.70 7.4
MRG 95.80 4.2
SML 88.0 0.7 11.3
Med. 94.7 0.5 4.8
ALL 55.9 1.9 0.3 0.3 39.0 0.8 1.7
Rabi Tiny 8.6 3.1 0.4 0.5 86.8 0.6
SMR 93.1 6.9
MRG 100.0
SML 98.7 0.7 0.6
Med. 98.4 0.6 1.o
ALL 54.6 1.3 0.3 0.5 42.8 0.3
Rajasthan Kharif Tiny 29.2 1.9 66.3 2.6
SMR 86.5 0.9 10.1 2.5
MRG 95.8 1.3 2.1 0.7
SML 96.3 0.4 0.3 2.6 0.3
Med. 95.1 0.8 1.0 2.7 0.3
ALL 87.3 0.8 0.3 0.1 10.8 0.8

48
Table 5 continued.

Percentage distribution of operational holdings by activity type

State season Holding Crop Vegetable Horti- Plantation Livestock Poultry Others
type production production culture

Rabi Tiny 28.3 0.5 70.1 1.1

SMR 94.8 1.7 3.5
MRG 93.8 5.5 0.7
SML 92.5 1.5 0.4 6.4 0.3
Med. 81.8 1.4 16.0 0.8
ALL 70.6 0.8 0.2 27.6 0.8
Tamil Nadu Kharif Tiny 28.2 12.3 2.2 4.9 34.0 9.4 8.9
SMR 84.1 1.0 2.1 6.8 2.8 0.3 2.8
MRG 90.6 0.6 0.4 2.9 2.6 0.7 3.2
SML 88.6 3.5 0.3 2.6 4.8 0.3
Med. 92.8 2.3 0.2 1.5 2.3 0.9
ALL 62.0 6.3 1.4 4.4 16.4 4.4 5.0
Rabi TlNY 23.4 11.4 3.6 4.7 40.8 9.7 6.4
SMR 67.2 1.3 4.3 8.2 12.4 6.1 0.6
MRG 75.1 1.2 5.1 4.8 11.7 2.1
SML 76.0 6.1 1.9 3.8 11.7 0.4
MED 97.7 3.2 3.2 8.2 14.1 0.3 0.5
ALL 47.5 7.2 3.5 5.2 26.8 6.1 3.7
Uttar Pradesh Kharif Tiny 58.1 2.5 1.3 35.2 0.6 2.4
SMR 93.2 0.7 1.0 4.5 0.6
MRG 96.0 0.4 0.4 3.1 0. I
SML 95.2 0.5 0.8 3.0 0.5
Med. 94.9 0.1 1.5 3.2 0.2
ALL 86.1 0.9 0.9 11.1 0.2 0.8
Rabi Tiny 58.6 4.7 1.2 0.7 31.2 0.8 2.9
SMR 94.4 2.9 1.1 0.3 0.8 0.5
MRG 96.8 1.6 0.1 1.3 0.2
SML 97.1 1.4 0.4 0.9 0.2
Med. 97.2 1.2 1.0 0.2 0.5
ALL 87.7 2.4 0.7 0.2 7.9 0.2 0.9
West Bengal Kharif Tiny 47.1 10.5 1.6 1.4 18.5 14.7 6.2
SMR 90.9 3.4 0.9 0.6 0.8 0.6 3.0
MRG 96.2 0.4 0.7 0.7 0.8 1.2
SML 94.5 0.1 0.5 0.3 2.8 1.9
Med. 95.6 0.6 0.3 2.4 1.2
ALL 75.3 4.9 1.0 0.8 8.1 6.2 3.1
Rabi Tiny 39.3 16.0 3.2 1.6 22.3 12.5 5.2
SMR 80.1 12.1 1.6 0.6 3.2 0.9 1.5
MRG 86.0 7.1 0.5 0.3 4.6 0.2 1.3
SML 80.0 7.6 1.6 8.2 1.0 1.6
Med. 89.1 7.5 0.9 1.4 1.1
ALL 62.8 12.1 2.0 0.9 12.9 6.2 3.3
All India Kharit Tiny 40.5 7.6 2.3 5.0 30.6 6.8 7.2
SMR 86.9 1.8 1.2 3.9 4.5 0.2 1.5
MRG 92.1 1.1 0.9 2.0 2.7 0.1 1.1
SML 92.6 0.9 0.5 1.5 3.5 0.2 0.7
Med. 93.7 0.5 0.8 1.1 3.4 0.1 0.4
ALL 77.4 2.7 1.2 2.8 11.1 2.1 2.7
Rabi TlNY 35.5 8.0 2.4 5.1 37.5 5.0 6.3
SMR 83.6 5.3 1.4 4.5 3.6 0.7 0.8
MRG 88.5 3.0 0.8 3.0 3.5 0.4 0.7
SML 89.1 2.5 1.0 2.1 4.8 0.2 0.3
MED 90.0 1.4 0.8 1.8 5.2 0.3
ALL 68.6 4.7 1.5 3.6 16.9 2.2 2.6

Source: Govt. of India (1997g).

49
 The contrasts between the (wet) kharif and
(dry) rabi seasons need further examination. In
most of the eight states, noncrop enterprises are
favored by a large number of farms, irrespective
of landholding size, more in the rabi season than
in the kharif season. The higher degree of on-
farm production diversification in these areas
during rabi signals the greater distress prevailing
during the dry months of the year.2 The striking
similarity of the crop-noncrop difference during
the kharif and rabi seasons in the Green
Revolution areas and the milder kharif-rabi
deviations in other irrigated regions needs to be
seen in contrast to what is happening in the
rainfed rice-producing eastern states. In the
rainfed states, bigger kharif-rabi deviations on
the one hand, and, within either cropping season,
a relatively more spread-out canvas of crop-
noncrop mixes, on the other, clearly point to a
“multiple involvement” strategy, primarily to
mitigate the distress that would follow if total
reliance was put on crop production alone.
Sectoral pattern of employment
To a typical rural household in India,
employment is available partly (though largely)
through on-farm activities and partly through
nonfarm activities. Farm activities manifest
themselves in work on one’s own farm as
cultivators and on others’ farms as agricultural
labor, This is sometimes referred to as the crop
sector and often includes plantations. Activities
allied to crop production and located within
agriculture-suchas raising of livestock,
poultry, pigs, etc., and production of milk-are
the main components of the noncrop sector.
Generally, as indeed defined by the Indian
Census Organization, hunting and trapping,
game propagation, forestry and logging, and
fishing are also included in the noncrop sector.
On the other hand, the range of nonfarm
activities is wide and encompasses those self-
employed in industry; construction; transport
and communications; wholesale and retail trade;
community, social, and personal services; as
2In more recent years, expansion of irrigation has facilitated crop diversification in some eastern states in the rabi
season.
50
well as those employed by others in these
occupations as wage-paid workers (Chadha
1993).
Farm and nonfarm employment
Table 6 gives state employment data of rural
households under the three broad categories
mentioned above and based on two independent
(admittedly, not completely comparable) sources
of data. For the crop sector, the 199 1 population
census (giving total cultivators and agricultural
laborers) is the only source. For the noncrop
agricultural and nonagricultural activities, the
1990 economic census data are handy. The two
sets of census data are the latest available.
The crop sector is still the most dominant
source of employment for rural households in all
parts of India. This is especially so for a few
rainfed rice-producing eastern states (e.g., Bihar,
Nagaland, Mizoram, Orissa). To raise the
standard of well-being of the rural populace in
general and of those in the eastern states in
particular, productivity in the farm sector, on
both a per hectare and a per worker basis, must
clearly improve. The employment base of the
noncrop sector is terribly low, almost negligible,
in most states. The depressingly low levels for
most of the eastem states need to be emphasized.
In other words, in spite of people’s efforts to get
into different types of noncrop production
regimes, branching off from crop to noncrop
agriculture is not discernible. The possibility of
a mix of noncrop employment with crop-sector
employment cannot be ruled out either. For
example, in a separate 1993-94 NSS
Employment Survey, national crop-sector
employment level accounts for 70% of rural
workers (Gov’t. of India 1997b). On the other
hand, the four main constituents of noncrop
employment (livestock, agricultural services,
forestry, and fishing) account for 5.3%, 0.6%,
0.3%, and 0.4% of employment, respectively.
The total of crop and noncrop employment for
1993-94 is 78.4%, which is very close to (our)
1990 economic census figure of 81.9%. In any
Table 6. Broad sources of employment of rural households, look into the composition of such employment
1990-91 Economic Census.
opportunities in each state. Table 7 fills this gap
Percentage of rural persons engaged in to some extent. With all its data limitations—
State Field-crop Non-
such as two-digit classification of production
Noncropb
agricultural agricultural agricultural sectors and interstate variations in product
activitiesa activitiesc activitiesC
composition, quality, and prices-Table7 gives
Andhra Pradesh 81.1 3.1 15.9 the broad sources of nonagricultural
Arunachal Pradesh 72.2 0.8 27.0 employment for rural households in each state.
Assam 70.0 0.4 29.6
Bihar 88.0 0.2 11.8
Gujarat 76.8 7.4 15.8 Major sources of nonfarm employment
Haryana 72.9 5.7 21.4
Himachal Pradesh 72.1 0.7 27.2
Karnataka 79.7 5.0 15.3 Manufacturing, trade, and community, social,
Kerala 56.1 1.7 42.2
Madhya Pradesh 88.1 1.7 10.2 and personal services (CSPS) together claim a
Maharashtra 82.9 2.2 14.9 lion’s share of total nonfarm employment in
Manipur 76.1 1.4 22.5
Meghalaya 78.3 0.8 20.9
each state. With some exceptions, the all-India
Mizoram 83.2 0.4 16.4 pattern of manufacturing, CSPS, and trade, in
Nagaland 83.7 0.5 15.8 that order, is duly observed by individual states
Orissa 80.8 1.3 17.9
Punjab 73.6 0.6 25.8 as well. Exceptions come largely from the east.
Rajasthan 82.6 1.3 16.1 For example, manufacturing employment figures
Tamil Nadu 77.5 1.7 20.8
Tripura 70.6 0.7 28.7 are much lower in comparison with CSPS
Uttar Pradesh 84.5 0.3 15.2 employment in Mizoram, Meghalaya, Nagaland,
West Bengal 70.2 2.4 27.4
All India 80.0 1.9 18.1 Tripura, Arunachal Pradesh, Manipur, and
Assam; only in West Bengal and Orissa does
aTaken from 1991 Population Census Reports. bNoncrop activities
include raising of livestock. pigs, poultry. etc., and production of milk, manufacturing hold an edge over CSPS
agricultural services, hunting, trapping, game propagation, forestry and employment. Meanwhile, in Bihar, the two
logging, and fishing (1990 Economic Census). Field crops show the
total of cultivators and agricultural laborers (1991 Population Census). employment types are nearly even. The edge of
cTaken from 1990 Economic Census Reports. (Figures may, therefore,

be taken as a rough approximation of the relative interstate positions

rather than exact estimates for each state.)
Sources: Govt. of India (1991, 1996a).
case, the fact of a very limited branching off into
noncrop areas remains.
Moreover, nonagricultural sources of
employment are and will be more important for
enhancing the earnings of rural households in
India, especially those in the rainfed rice-
producing areas in eastern India.
Understandably, the picture is highly disparate
among all states and among the eastern states.
For example, among the eastern states,
nonagricultural employment accounts for as high
as 25-30% in Assam, Tripura, West Bengal, and
Arunachal Pradesh. It languishes as low as 15-
20% in Nagaland, Mizoram, and Orissa and at a
disparately low level of 11.8% in Bihar. It needs
to be clarified, however, that a final view about
the impact of nonagricultural employment on
overall productivity, earnings, and well-being of
rural households cannot be framed before we
manufacturing employment over its CSPS
counterpart is far more marked in most of the
noneastern states. The structure of nonfarm
employment is thus relatively weaker in most
parts of the eastern region than in the rest of the
country. The most telling weakness is
discernible in Mizoram and Meghalaya. If only
the composition of the CSPS sector were
available for the individual states, including the
eastern states, one would have clearly seen that a
substantial part of the CSPS employment in the
eastern states came directly through public-
sector channels or indirectly through public
funds, autonomous and unguided by what was
going on in the commodity sectors of their local
economies.
Two more facts testify to the inherent
weakness of the nonfarm segment in many of
the eastern states. The first is the more extended
size of the hotel and restaurant business. The
proliferation of roadside eating and drinking
enterprises, especially when the hard-core
commodity-producing sectors (such as

51
 Table 7. Distribution of usually employed rural workers engaged in major nonagricultural activities, 1990 Economic
Census.

Percentage of rural workers engaged in

State Manufacturing Trade Hotel and Transport Community, Othersa

restaurant and communi- social, and
Wholesale Retail cation personal
services

Andhra Pradesh 44.6 1.0 17.1 4.1 1.1 27.5 3.9

Arunachal Pradesh 19.4 0.3 16.1 6.9 2.0 47.9 7.4
Assam 32.3 0.8 15.5 3.8 1.1 39.3 7.3
Bihar 32.4 0.5 28.5 3.9 0.9 30.4 3.4
Gujarat 39.1 2.5 18.7 1.7 2.7 28.9 6.4
Haryana 39.5 1.1 18.4 1.9 2.4 31.8 4.9
Himachal Pradesh 28.9 0.6 15.3 4.1 2.5 42.5 6.1
Karnataka 36.8 1.0 19.5 6.2 1.5 30.4 4.6
Kerala 30.9 1.9 20.9 7.4 1.9 31.7 5.3
Madhya Pradesh 41.4 0.8 18.8 2.7 1.4 29.9 4.9
Maharashtra 33.0 1.2 18.4 3.9 2.5 34.5 6.5
Manipur 27.3 0.1 19.2 4.9 3.1 42.1 3.1
Meghalaya 9.8 3.8 18.2 12.8 3.6 40.0 11.8
Mizoram 6.6 0.3 20.7 4.7 1.7 63.0 3.1
Nagaland 15.4 2.9 15.4 3.9 0.6 60.8 1.1
Orissa 36.2 0.7 20.3 4.7 1.7 32.2 4.2
Punjab 29.6 1.3 20.1 1.5 1.6 41.6 4.5
Rajasthan 30.1 0.7 19.3 3.1 2.4 37.5 6.9
Tamil Nadu 43.5 2.4 16.4 5.4 1.4 26.7 4.2
Tripura 20.3 0.3 23.2 4.9 3.0 45.2 3.1
Uttar Pradesh 45.4 0.5 22.1 2.7 1.3 25.6 2.5
West Bengal 38.2 3.5 22.2 2.8 3.9 25.1 4.2
All India 37.9 1.3 19.7 3.9 1.9 30.3 4.7

aIncludes rural persons engaged in mining + quarrying, construction. storage and warehousing and finance, insurance and real estate.
Source: Govt. of India (1996a).

manufacturing) offer little hope to expanding the
labor force, is a common phenomenon of weak
economies. Compared with the Green
Revolution states and the industrially
progressive states (such as Gujarat, Maharashtra,
and Karnataka), the employment size in this
sector is far higher in most of the eastern states,
except in West Bengal. The second fact relates to
the size of the trade sector and the relative
weights of its wholesale and retail components.
In general, in most eastern states, against the
backdrop of an extremely narrow employment
base in wholesale trade, the overarching size of
the retail trade cannot escape attention. The
cases of Bihar, Manipur, Mizoram, Orissa, and
Tripura are obvious. The “extended canvas” of
the retail trade in these areas smacks more of
desperation (approximately mirrored through the
overwhelming size of self-versus wage-paid
employment) rather than the requirements of an
expanding economy. We have more to say about
the wholesale-retail trade relationship in these
areas later in the paper.
Rural area’s share in nonfarm
employment
In terms of NSS surveys on nonfarm
employment, “employing units” fall under two
broad categories: those being run exclusively by
members of the household themselves (called
own-account enterprises: OAEs) and those
employing one or more hired hands, on a fairly
regular basis, in addition to family workers
themselves (called establishments: ESTTs).
Being exclusively family enterprises, the OAEs
are expected to be small. with fewer workers
employed, compared with the ESTTs (Table 8).
In most states, the rural areas have a high
share of the OAEs and employment therein. It
does not appear that the rural areas are devoid of
ESTT nonfarm enterprises in eastern and other
states, the interstate variations notwithstanding.
It is remarkable to see, in each state, a very close
correspondence between rural area’s share in the
number of enterprises and that of employment.
under the OAE segment. This indicates that the

52
Table 8. Some features of nonagricultural activities/employment in the rural economy of India. 1991 Economic Census.

Percentage share of rural areas Workers hired to total workers Percentage of

in nonagricultural employed in manufacturing units Wholesale-
enterprises/employment rural area (%) employing retail
trade
State OAEsa ESTTs b Manufac- Whole- Retail Personal 3 or 10 or worker f
turing sale trade services e more more
ENT c EMP d ENT EMP workers workers
in OAEs in ESlTs

Andhra Pradesh 69.0 70.4 53.6 46.6 46.9 42.6 10.5 54.2 7.4 23.0 16.6
Arunachal Pradesh 79.9 78.8 73.1 63.5 77.3 87.0 33.9 94.4 1.1 17.6 59.1
Assam 73.6 73.3 66.3 63.9 78.6 43.9 18.0 63.9 9.0 12.5 20.3
Bihar 68.9 69.2 49.7 38.7 37.8 32.1 11.8 72.8 8.8 12.0 53.0
Gujarat 44.4 43.9 37.4 28.7 62.9 61.2 19.4 72.6 5.1 30.0 7.5
Haryana 48.0 46.3 35.4 34.0 67.7 50.0 10.0 70.9 4.2 21.3 16.7
Himachal Pradesh 82.8 81.5 74.3 58.6 39.4 59.4 17.7 80.2 1.6 10.6 27.9
Karnataka 59.9 58.7 50.0 37.6 58.1 47.7 20.2 66.5 7.3 20.1 19.3
Kerala 71.9 71.5 58.8 51.2 66.9 43.7 24.0 74.9 2.6 10.6 10.8
Madhya Pradesh 61.2 61.4 50.9 32.2 22.3 51.8 8.2 67.6 9.4 16.4 23.8
Maharashtra 51.4 50.0 32.2 21.5 56.0 68.1 14.9 70.0 4.7 20.5 15.2
Manipur 51.6 53.0 58.5 43.1 23.5 43.7 4.3 89.1 3.6 6.7 130.0
Meghalaya 64.1 66.2 63.0 44.5 60.0 70.9 22.4 82.4 3.6 9.4 4.8
Mizoram 34.7 36.6 48.9 26.5 24.4 51.9 12.9 91.3 2.1 7.2 80.8
Nagaland 47.0 46.2 56.2 36.1 72.4 82.3 25.6 93.9 2.2 17.1 5.3
Orissa 80.1 82.5 68.5 49.3 22.0 30.6 8.6 69.1 7.8 90.0 29.1
Punjab 45.1 42.2 34.6 28.0 63.0 43.7 12.3 70.7 3.9 15.8 16.1
Rajasthan 58.1 56.8 52.2 36.1 30.6 34.5 9.9 72.6 5.9 13.1 27.9
Tamil Nadu 57.2 57.8 44.2 37.8 54.5 36.1 21.7 73.7 7.6 17.4 6.8
Tripura 71.8 72.6 66.8 52.1 43.1 30.0 13.9 78.7 4.9 8.5 75.3
Uttar Pradesh 52.4 52.5 35.9 34.8 47.5 46.1 10.2 63.3 11.3 14.8 43.6
West Bengal 71.1 71.6 44.5 30.6 29.9 17.0 10.6 58.1 8.0 12.0 6.3
All India 60.5 60.7 44.9 34.4 46.5 38.4 13.9 67.6 7.5 17.5 13.8

a
OAEs = own-account enterprises (run by members of the household without hiring any worker, on a fairly regular basis), bESi-rs = establishments (run by employing at least one hired worker. on a fairly regular
basis). c 5NT = no. of enterprises. dEMP = employment. e Personal services means community, social, and personal services. f No. of persons employed in rural retail trade for every one person employed in rural
wholesale trade. Sources: Govt. of India (1996a,b.d.f).
 employment content of rural OAEs is not
different from that of urban OAEs. As we see in
Table 8, 90-95% of rural OAEs employ up to
two workers only, and the position is summarily
the same with urban OAEs. The rural-urban
contrasts are far more striking, however, for
ESTTs. The big gap between rural area’s share
in the number of ESTTs and employment therein
is relatively more pronounced in the eastern
states of Orissa, Nagaland, Mizoram,
Meghalaya, Manipur, Bihar, West Bengal, and
Tripura and points to lower employment
capabilities of such units in the rural areas.
Assam is an exception. It enjoys a widespread
canvas of ESTTs, in both rural and urban areas,
in terms of employment. A fairly sizeable
number of ESTTs employing 100-199 or 200-
499 or even 500 or more workers are located in
the state, partly in the public sector and partly in
the oil-extracting private sector. This makes
Assam strikingly different from the rest of the
eastern states (Govt. of India 1996).
The relative disadvantages of the rural areas
are well known. Apart from technological gaps,
inadequate and irregular supply of raw materials,
lack of organized marketing channels, imperfect
knowledge of market conditions, inadequate
availability of credit, infrastructural constraints
(including power shortages and breakdowns),
deficient managerial skills, and so on are the
handicaps commonly reported for the wide mass
of rural industries (Chadha 1992). The
employment disadvantage in rural areas,
although commonly observed in other states as
well, is really small in many noneastern states
(e.g., Gujarat, Haryana, Kerala, Punjab, Tamil
Nadu, Uttar Pradesh, etc.).
The pattern of hiring workers for nonfarm
jobs is strikingly different between the group of
eastern states and the rest of the rural economy,
on the one hand, and among eastern states
themselves on the other. Let us consider the
CSPS segment. In many of the eastern states
(such as Arunachal Pradesh, Nagaland,
Mizoram, Manipur, etc.), more than 90% of the
workers in CSPS enterprises are hired hands.
The figures are fairly high for other eastern
states as well. As pointed out earlier, the public
sector plays a very important role in boosting
many employment opportunities under the CSPS
54
sector. The incidence of hiring workers for
manufacturing, however, follows a different
pattern. In many eastern states, manufacturing
enterprises are managed by family workers
themselves (see, for example, the low figures for
Orissa, Manipur, Mizoram, West Bengal, and
Bihar, Table 8). Again, the retail trade is run
largely by family hands, and, in relative terms,
the eastern states do this on a much higher scale
than the rest of rural India.
Finally, Table 8 clearly reflects the smaller
size of manufacturing enterprises, in most
eastern states, whether under the OAE or ESTT
umbrella. For example, in not more than 4-5%
of own-account manufacturing enterprises, three
or more workers are at work in Arunachal
Pradesh, Mizoram, Nagaland, Manipur,
Meghalaya, and Tripura. A similar handicap with
respect to ESTTs is discernible for many of the
eastern states.
Hired workers in the farm/nonfarm sector
Table 9 shows the extent to which farm and
nonfarm activities are carried out with family
and hired workers in different states. The eastem
states have many contrasts, both among
themselves and with the rest of rural India. For
many of the eastern states (e.g., Bihar, Orissa,
Tripura, and West Bengal), hired labor accounts
for a very large proportion of total workers for
crop production, whereas, for the same states,
the noncrop sector sustains itself largely through
family labor. On the other hand, in Arunachal
Pradesh, Assam, Meghalaya, Mizoram, and
Nagaland, crop production is sustained largely
by family workers, whereas noncrop enterprises
are manned quite substantially by outside labor.
It is interesting to see a clear substitution
between family and outside workers in one
group of eastern states, and vice versa for the
other, for crop or noncrop activities. In most
other (noneastern) states, crop production
depends substantially on outside labor, while the
noncrop sector relies on family labor. This is
consistent with common perceptions about the
much higher amount of work and its more
demanding nature (including the needed
weather-induced flexibility in the supply of
labor) in farm production compared with the less
Table 9. Pattern of hiring rural male and female workers in different sectors of India s rural economy: 1991 population census and 1990 economic census data.

Percentage share of hired workers Percentage share of hired female Percentage share of hired female
to total workers engaged in workers to total female workers workers to total hired workers
State
Crop sector Noncrop Nonagri- Crop Noncrop Nonagri- Crop Noncrop Nonagri-
sector cultural sector sector cultural sector sector cultural
activities activities activities

Andhra Pradesh 58.6 10.8 42.2 72.0 9.2 40.2 51.9 30.1 29.9
Arunachal Pradesh 7.3 58.5 79.3 5.6 18.4 72.6 38.1 3.9 11.7
Assam 19.9 30.5 62.7 20.7 18.1 79.0 23.2 9.2 16.6
Bihar 45.97 15.1 42.7 64.5 8.4 40.9 26.4 12.5 13.5
Gujarat 39.9 10.8 55.6 58.4 8.6 51.1 39.3 39.5 14.9
Havana 32.3 20.5 57.0 33.7 6.9 79.2 13.9 5.9 20.2
Himachal Pradesh 5.0 19.1 56.7 2.4 5.5 70.4 18.4 5.3 14.8
Karnataka 44.8 34.3 51.7 64.7 41.2 57.2 50.7 53.8 27.4
Kerala 66.8 27.1 57.1 86.2 15.9 75.3 32.6 10.8 37.6
Madhya Pradesh 30.6 8.9 37.5 41.6 6.4 26.7 47.3 28.5 15.3
Maharashtra 44.3 12.1 53.8 52.0 6.0 53.3 53.8 13.8 15.3
Manipur 12.4 5.8 48.1 15.7 2.9 30.2 57.3 17.5 23.1
Meghalaya 18.8 33.8 63.2 18.1 18.8 52.1 43.4 14.8 21.5
Mizoram 2.7 24.3 67.5 2.0 11.7 57.6 34.8 15.3 26.1
Nagaland 6.3 44.2 77.6 5.7 24.1 73.9 45.2 13.3 20.3
Orissa 39.1 13.3 37.9 67.4 8.9 26.6 35.5 15.0 15.4
Punjab 40.4 28.7 56.2 54.9 12.4 84.7 6.2 5.9 18.6
Rajasthan 14.0 6.8 46.6 20.7 3.2 45.1 37.7 12.0 12.2
Tamil Nadu 57.4 17.7 52.5 70.8 14.9 54.9 48.5 28.0 34.2
Tripura 37.7 24.8 52.2 44.7 5.4 71.8 23.2 2.9 20.1
Uttar Pradesh 25.9 12.5 43.7 42.7 3.9 39.3 24.7 7.4 10.4
West Bengal 45.9 13.8 23.5 69.2 4.2 29.2 19.8 7.6 15.9
All India 39.6 16.1 46.9 55.2 14.6 47.6 39.3 32.3 21.0

Sources: Govt. of India (1991, 1996a).

 rigid and flexible schedules set for many
noncrop activities.
The picture is undoubtedly different for
nonfarm activities. A substantial proportion of
rural households do not need financial
capability, technical know-how, or market
intelligence to mount nonfarm enterprises on
their own. They are nonetheless ready to work as
wage-paid workers in nonfarm jobs, depending
on their family occupation, educational
attainment, job locale and its technical
requirements, and so on. Specific to the eastern
states, it is interesting to see a much higher
proportion of hired labor in Arunachal Pradesh,
Assam, Meghalaya, Mizoram, and Nagaland.
The three major eastern states (Bihar, Orissa,
and West Bengal) are more similar to the
noneastern states than to their adjoining sisters.
This could be partly because these three states
are relatively “more industrialized” and partly
because of the fairly noticeable base of industrial
activity in the rural areas for which hired labor
has been an indispensable prerequisite. For the
rural people in the eastern states as a whole, the
outlets of nonfarm employment are open
through wage labor rather than self-employment.
For the “seven eastern sisters,” the handicap is
particularly severe for manufacturing.
What has been said about total of hired labor
is also true for hired female workers (Table 9).
The two contrasting positions within the group
of eastern states need to be reiterated for all
three categories of employment. In West Bengal,
Bihar, and Orissa, nearly two-thirds of the
female workers engaged in the crop sector have
to work as agricultural wage laborers. In these
states, the proportion of hired female workers
doing nonfarm activities is relatively lower than
in the other eastern states, signifying economic
distress of some kind. Perhaps, the females here
are under greater pressure to mount “self-
employing” nonfarm ventures because wage-
paid agricultural employment is not sufficient to
sustain their families. Nonetheless, the situation
in the remaining eastern states (see particularly
Arunachal Pradesh, Mizoram, and Nagaland) is
relatively more reassuring. Here, the incidence
of nonfarm wage employment for females is
much higher (in some cases, exceeding 70%)
56
than in the large states of West Bengal, Bihar,
and Orissa.
The hired female workers do not, however,
constitute a very high proportion of all hired
workers. In general, hiring of females is
preferred in the crop sector, whereas more males
are involved in nonfarm activities. This validates
the common perception of more women workers
staying in agriculture and more men workers
venturing out to nonagricultural activities. This
applies to the eastern states and to the rest of the
country, the varying state-level figures
notwithstanding.
Female workers
It is evident in Table 9 that female cultivators are
not common in the states of West Bengal, Bihar,
and Orissa. This is also true in Assam. The other
eastern states (Arunachal Pradesh, Manipur,
Meghalaya, Mizoram, and Nagaland) have a
higher proportion of female cultivators; the
problem of agricultural development in these
states would thus have an additional element of
“gender infirmity,” which manifests itself in
many different ways.
A fairly substantial proportion of the females
work as agricultural laborers in practically all
the eastern states, except in Punjab and Haryana.
Females likewise constitute a fairly large share
of noncrop agricultural and nonagricultural
employment. On the whole, female participation
in all walks of rural economic life is evidently
substantial. In addition, a sizeable proportion of
female workers in several eastern states have to
shoulder the responsibility of agricultural
entrepreneurship, which makes the task of
enhancing agricultural growth more difficult.
If we look into the sectoral distribution of
female workers themselves, a majority of them
are “dumped” in agriculture; in most states, the
proportion of female workers in nonfarm jobs is
either very low or negligible (Table 10). West
Bengal in the east, Punjab in the north, and
Kerala in the south are exceptions. In the eastern
states, although two-thirds or more (in some
cases. more than nine-tenths) of the female
workers are engaged in agriculture, they are
mainly cultivators. In contrast, female
Table 10. Gender differences in some aspects of employment of rural workers in crop and noncrop sectors of agriculture
and nonagricultural activities, 1991 Population Census and 1990 Economic Census.

Percentage distribution Percentage of hired

Percentage share of females among of female workers as females among
total female workers
State Cultivators Agricul- Noncrop Nonagri- Cultivators Agricul- Agricul-
tural production cultural tural tural Noncrop Nonagri-
laborers workers workers laborers workers sector cultural
activities

Andhra Pradesh 28.6 51.9 35.2 31.3 24.6 63.2 87.8 9.2 40.2
Arunachal Pradesh 50.7 38.1 12.5 12.8 86.9 5.1 92.0 18.4 72.5
Assam 22.2 23.2 15.4 13.1 54.0 14.1 68.1 18.1 79.0
Bihar 12.3 26.4 22.5 14.0 33.1 60.1 93.2 8.4 41.0
Gujarat 18.6 39.3 49.8 16.3 35.5 49.8 85.3 8.6 51.1
Havana 13.1 13.9 17.5 14.5 57.2 29.0 86.2 6.9 79.2
Himachal Pradesh 38.6 18.4 18.7 11.9 90.1 2.3 92.4 5.5 70.4
Karnataka 22.5 50.7 44.8 24.7 30.0 55.1 85.1 41.2 57.2
Kerala 10.5 32.6 10.4 28.5 6.7 41.7 48.4 15.9 7.3
Madhya Pradesh 29.3 47.3 39.5 21.5 54.9 39.1 94.0 6.4 26.7
Maharashtra 39.4 53.8 27.6 15.5 44.9 48.6 93.5 6.0 53.3
Manipur 43.6 57.3 35.0 36.7 65.9 12.3 78.1 2.9 30.2
Meghalaya 45.6 43.4 26.6 26.0 70.5 15.6 86.0 18.8 52.1
Mizoram 47.4 35.8 31.9 30.6 92.1 1.9 94.0 11.6 57.6
Nagaland 50.4 45.2 24.4 21.4 87.1 5.3 92.4 24.1 73.9
Orissa 10.9 35.5 22.4 21.9 27.8 57.5 85.3 8.9 26.6
Punjab 3.5 6.2 13.9 12.4 28.0 34.1 62.1 12.4 84.7
Rajasthan 23.6 37.7 25.8 12.7 74.2 19.4 93.5 3.2 45.1
Tamil Nadu 26.9 48.5 33.1 32.7 24.6 59.8 84.4 14.9 54.9
Tripura 17.4 23.2 13.6 14.6 43.1 34.8 77.9 5.4 71.8
Uttar Pradesh 11.5 24.7 23.6 11.4 51.3 38.3 89.6 3.9 39.3
West Bengal 7.5 19.8 24.8 18.2 20.2 45.5 65.7 4.2 29.2
All India 20.8 39.1 35.6 20.8 39.9 47.9 86.9 14.6 47.6

Sources: Govt. of India (1991,1996a).

agricultural laborers are numerically far stronger
than female cultivators in West Bengal, Bihar,
and Orissa.
Land/labor productivity in agriculture
Agricultural productivity differs from state to
state. We can look at productivity in terms of per
hectare or per worker output. Table 11 gives
interstate variations in both parameters. Three
important individual crops (rice, maize, and
wheat) and four crop groups (total of pulses,
oilseeds, cereals, and food grains) are chosen.
The productivity gaps in most eastern states are
apparent. For example, rice yield is lower than
the national average (indeed much lower than in
&he Green Revolution states) in Arunachal
Pradesh, Assam, Bihar, Meghalaya, Mizoram,
Nagaland, and Orissa, and only marginally
better in Tripura and West Bengal. In five out of
six eastern states reporting maize cultivation,
yield is behind the national average. The eastern
states seem to be doing better in pulses, but, for
crop aggregates (total of cereals, food grains,
and oilseeds), their performance is inferior.
The relative performance of the eastern
states is assessed using I-year data (though the
latest available) only. Without doubt, the year-to-
year up-and-down swings in yield, most
ostensibly of the main rice crop, would be far
more frightening. The magnitude of these year-
to-year yield variations render production in
these states unstable. Agriculture here is thus of
a different nature. To be fair, therefore, the
relative agricultural backwardness of the eastern
states is hardly portrayed by I-year figures for
crop yields. Much more statistical work needs to
be done to capture the real problems of their
agriculture, especially the instability that is built
into their production base. This is simply beyond
the purview of this paper.
Rough estimates of per worker productivity
(proxied by net domestic product originating in
the crop/primary sector divided by total
workers) reveal the same backwardness (Table
11). Most of these states lag behind the national

57
Table 11. Some aspects of land and labor productivity in Indian agriculture.

Av yield of individual cropdcrop groups Per worker productivity: Rs at constant Land-person ratio
(quintals ha-1) 1995-96a 1980-83 pricesb
State Operated Cropped
Rice Maize Wheat Total Total Total Total Crop 1980-81 Crop 1990-91 area area per
pulses cereals food oilseeds sector total sector total per rural
grains alone primary alone primary person person
sector sector (ha in (ha in
1992) 1992)

Andhra Pradesh 25.0 25.5 - 4.2 21.0 17.2 9.2 2007 2049 2263 2290 0.19 0.26
Arunachal Pradesh 11.5 13.3 - - 12.1 5.6 10.6 1600 4615 3171 10499 0.22 0.34
Assam 13.5 6.8 11.1 6.9 13.4 12.7 5.2 281 9 2665 2964 2732 0.13 0.19
Bihar 13.7 17.4 20.2 6.1 15.6 14.5 6.2 1846 1956 1918 2072 0.10 0.13
Gujarat 14.5 9.9 22.2 6.9 12.5 10.8 - 3686 3809 3369 3482 0.27 0.39
Haryana 22.2 18.3 36.9 6.8 27.2 23.5 12.8 7320 7272 9455 941 2 0.37 0.47
Himachal Pradesh 13.5 21.5 14.4 - 16.7 16.2 - 2586 3344 3219 3749 0.14 0.21
Jammu and Kashmir 18.6 15.9 14.6 4.7 15.9 10.5 4.2 3599 4250 - - 0.09 0.18
Karnataka 23.8 36.3 6.9 4.7 15.3 12.9 6.8 2696 2700 2780 2733 0.27 0.40
Kerala 19.7 - - 8.0 19.5 12.2 6.0 461 3 4329 561 6 481 8 0.06 0.14
Madhya Pradesh 11.0 13.4 16.1 8.0 11.9 10.8 8.7 2004 2335 2550 2634 0.34 0.49
Maharashtra 16.9 14.6 12.8 4.6 10.0 8.1 7.8 2498 2715 2866 3103 0.32 0.44
Manipur 25.1 - - - 25.1 25.1 4.6 2314 2459 2146 2426 0.10 0.15
Meghalaya 11.6 12.2 - - 11.7 11.6 6.4 1611 1575 1685 1619 0.13 0.1 7
Mizoram 15.4 - - - 15.9 15.9 9.1 1006 1117 2011 187628 0.22 0.29
Nagaland 13.2 10.9 - 10.7 12.4 12.4 8.9 1123 1260 1164 1807 0.08 0.22
Orissa 13.8 12.2 - 5.4 13.3 10.9 5.2 2507 2748 1966 2188 0.17 0.36
Punjab 31.3 28.0 38.8 8.2 35.2 38.4 12.0 7540 7569 10606 10603 0.16 0.53
Rajasthan - 8.9 25.0 4.2 9.8 8.1 8.0 281 8 2770 4026 4076 0.47 0.57
Tamil Nadu 33.9 - - 3.7 26.6 21.4 14.7 1529 1517 2002 2027 0.11 0.19
Tripura 20.1 - - - 20.0 19.4 7.2 2960 3470 3447 3778 0.06 0.20
Uttar Pradesh 18.7 13.8 24.5 7.7 20.7 18.9 8.6 2899 2997 3207 3227 0.15 0.23
West Bengal 20.0 - 26.1 - 20.3 21.3 7.8 3113 338 1 3658 3947 0.10 0.18
India 18.6 15.7 24.9 - 17.3 15.0 8.5 2869 3048 3291 3429 0.20 0.30

a b
Govt. of India (1998a,b), Population Census 1991 (see Table 6).
levels in terms of per worker productivity in the
crop sector or the primary sector as a whole. The
productivity gaps are more pronounced for
Bihar, Manipur, Meghalaya, Nagaland, and
Orissa. The relative backwardness of these states
seems to persist (see 1990-91 vs 1980-81
figures).
Incidentally, per worker productivity in the
noncrop sector is higher than that in the crop
sector. This seems to be a decisive advantage of
these states compared with many others in the
rest of the country. Note in particular the levels
of the two types of productivity (Table 11) in
Punjab, Haryana, Uttar Pradesh, Tamil Nadu,
Andhra Pradesh, and Karnataka versus differing
levels in Bihar, Manipur, Nagaland, Orissa,
Tripura, and West Bengal. In other words, most
of the eastern states can make up for the low
labor productivity in the crop sector through
diversification to noncrop activities. As seen
earlier (Table 8), the noncrop sector in these
states is still a tiny fraction of total agriculture,
and the future policy thrust must aim at moving
more people from crop production to noncrop
enterprises, depending on the physical
environment, local resource base, infrastructure
support, and marketing network available in
each state. The biggest consideration, inter alia,
for embarking upon crop to noncrop
diversification is the extremely low land base of
most of the eastern states. The land-person ratio,
particularly for operated area per person, points
to this most severe constraint (Table 11).
Productivity in nonagricultural-
activities
We have noted earlier (Table 7) that
manufacturing is the most dominant component
of the rural nonfarm sector in India, followed by
CSPS, trade, and so on. It would be useful to
look into rural manufacturing to get insights into
the productivity and earning levels of rural
nonfarm workers. Table 12 provides some first-
hand information obtained from the 1994-95
nationwide survey on unorganized
manufacturing enterprises in rural India. It may
be mentioned, in passing, that manufacturing in
rural India is covered mostly under what is
known as the “unorganized segment.” Own-
account manufacturing enterprises (OAMEs) in
rural India dominate in each state (Table 12), in
terms of both numerical strength and proportion
of employment offered.
Without doubt, such enterprises are run
inside and around residential premises. The
value of fixed assets per enterprise is much
lower in most eastern states; the gaps between
these states and Gujarat, Haryana, Punjab, etc.,
need to be analyzed in particular. The
investment gaps are reflected in value-added
gaps. The most appalling gaps are discernible in
per worker salary/wages for hired and paid
household workers. Such earnings are
ridiculously low for Bihar, Orissa, and Tripura
(eastern states) and for Jammu-Kashmir,
Madhya Pradesh, and Rajasthan (noneastern
states). In general, the relative weaknesses of the
eastern states are quite apparent in this segment
of the rural economy, just as was seen earlier for
agriculture.
A fact that might account for the lower per
worker productivity/earnings or gross value
added in the eastern states is that, in their
(unorganized) manufacturing sector, part-time
workers make up a much higher proportion of
total workers than in most other states. For
example, in Assam, Nagaland, and Orissa, more
than 25% of the workers are part-time workers;
in West Bengal, the percentage is 17; in Tripura,
it is 12, and so on. In most of the eastern states,
part-time employment in rural areas is much
higher than in urban areas (Table 12).
Finally, an employment feature that reveals
a marked structural weakness of the rural
manufacturing segment in the eastern states is
the high percentage of unpaid girl workers to
total unpaid workers (Table 12). The high
numbers show that the OAMEs here are
household/cottage enterprises undertaken as an
adjunct to the main work (agriculture), more in
the hope of earning some additional income for
the household rather than running them as
independent commercial entities. The small and
ad hoc production routines including work on a
part-time and “as-is-convenient” basis are
natural consequences of the use of outdated
technology, inferior products, and catering to
local or nearby markets.
59
Table 12. Salient features of unorganized manufacturing (UM) enterprises, 1994-95 NSS data.

% Share of % Share of % of HH enterprises Value of Per Per worker % of part- % of Rural- % of

OAMEa employ- run inside residence fixed enterprise salary/wages time workers females urban ratio unpaid girl
among all ment in or as moving assets estimate for hired and engaged in among of the workers
State UM enter- OAME enterprises (less land) of gross paid unorganized part-time proportion to total
prises among all per value household manufacturing workers: of part-time unpaid
UM Rural Urban enterprise added in workers in rural units rural areas workers workers in
enterprises OAMES OAMES rural unorga-
nized units

Andhra Pradesh 85.6 83.1 79.8 57.7 8623 7067 1678 3.4 52.9 1.4 9.3
Assam 89.0 84.7 87.9 43.1 5875 8161 1022 24.4 58.2 2.4 12.1
Bihar 96.0 90.0 85.0 50.7 7190 8856 254 10.3 65.0 3.7 7.2
Gujarat 87.8 60.3 69.2 17.0 31928 12899 1991 3.3 42.4 1.4 5.3
Haryana 89.8 69.3 62.1 26.5 25732 15828 2019 9.4 42.6 3.1 3.7
Himachal Pradesh 94.6 83.9 57.9 39.7 14550 6040 10071 13.6 12.5 2.3 2.3
Jammu and Kashmir 93.0 85.8 67.5 21.7 11182 6661 684 22.7 49.8 1.8 4.5
Karnataka 82.6 62.6 81.6 61.4 11891 7485 2302 4.1 65.9 0.8 8.2
Kerala 76.9 51.9 64.0 59.5 15618 8926 11241 17.7 68.9 1.3 5.1
Madhya Pradesh 94.6 90.4 83.7 47.6 9461 9557 792 6.5 35.4 0.9 4.4
Maharashtra 89.2 71.9 75.3 39.3 15524 11548 3400 9.4 35.1 1.9 3.0
Manipur 99.7 99.0 65.0 55.7 7773 6156 6.5 73.8 1.9 27.0
Meghalaya 94.5 89.4 87.4 17.1 6239 14210 9.8 40.8 6.1 5.1
Nagalang 92.0 80.1 61.1 41.4 17380 13929 30.6 65.0 2.3 16.3
Orissa 97.8 96.3 92.2 53.0 4024 4553 507 38.3 54.0 3.9 14.8
Punjab 88.5 72.1 53.2 32.6 18659 15243 2110 9.5 67.4 2.4 5.4
Rajasthan 94.4 88.8 81.4 47.9 18403 14448 391 7.2 44.4 2.5 6.3
Tamil Nadu 84.8 62.5 86.8 68.8 18601 10708 8167 5.9 57.6 1.7 8.8
Tripura 91.7 88.6 86.5 57.8 3663 6880 874 11.9 45.0 1.4 13.1
Uttar Pradesh 90.0 78.1 74.4 55.4 10323 9852 2356 10.7 52.3 1.6 9.8
West Bengal 93.0 86.0 90.8 56.4 4385 8758 1612 17.0 58.2 2.8 10.7

aOAME = own-account manufacturing enterprises. Source: Govt. of India (1997e,h).

Concluding remarks
The eastern states are mostly rural and
agriculture is their mainstay. Agriculture is
plagued by many problems-itis unstable and
has low yield/productivity. The noncrop sector is
still a tiny fraction of the total rural economy.
The inherent weaknesses of the nonfarm sector,
especially rural manufacturing, are no less
daunting; in some of these states, per worker
nonfarm earnings are extremely low. On the
employment side, much of the work force is still
confined to agriculture. Employment under an
unstable production regime is both
undependable and less remunerative. People
work hard but do not have enough earnings. So,
they have to look for opportunities outside
agriculture, where opportunities are not that
promising either. Not only is the proportion of
the work force engaged in nonfarm activities
low, but many people work on a part-time basis.
Part-time employment is a common practice
among female workers of this region. Overall,
their economies suffer from many structural
handicaps. The well-being of rural people in
these areas is thus perpetually at stake.
It is important that agriculture be put on top
of the policy agenda. A two-pronged policy
intervention is needed, one at the institutional
level and the other at the household level. A
more responsive and supportive institutional
environment has to be in place so that what is
technically feasible becomes financially possible
for individual farmers. A people-government
partnership, on an enduring basis, is a must for
these areas. Once agriculture improves, the
nonagricultural segment of the local economy
would improve as well. After all, the
intersectoral forward and backward linkages,
though limited, do operate at the local level.
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Discussion
Question: Are the non-farm employment
opportunities independent of growth
in the productivity in farm sector?
The studies have shown that unless
you trigger growth in farm sector,
non-farm employment opportunities
will not grow. This kind of link was
not visible from the information
shown here.
62
Answer: The phenomenon of less incidence
of poverty among landless in
comparison to marginal farmers is
observed in developed as well as in
backward areas, simply because of
high occupational diversity of
landless people. They are free from
land and can move throughout the
year to seek employment. The
linkage between productivity growth
and non-farm employment for
national and regional levels is
obvious, but one may not observe
such linkage in village-level data.
However, we must recognize that
there is a limit to the generation of
non-farm employment through farm
productivity growth alone.
Question: Risk in rice production for small
farmers is very high, and therefore
they diversify to non-farm activities.
What would be opportunities for
making an impact through research
and improving productivity of rice
sector? When the farm size is small,
actual income from rice will be quite
low even with productivity-
increasing technologies.
Answer: Yes, I agree with you. Given the
size of these farms (small and
marginal), it is rather difficult to
have adequate income even with the
best possible technology intervention
through research. Something more
substantive should be thought of.
Notes
Author’s address: Jawaharlal Nehru University,
New Delhi, India.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAPARRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
Crop insurance: a policy perspective
P. K. Mishra

In agriculture, risk can arise from unpredictable variations in yield or price or both. Crop
insurance addresses the problem of yield risk that is the dominant source of risk in rainfed
agriculture, This paper provides an overview of issues related to crop insurance, especially in
the context of India. Despite the conventional wisdom regarding high costs of crop insurance
schemes, an analysis of the Indian comprehensive crop insurance scheme shows that this
scheme has a positive effect on crop inputs, output, and incomes. The gross benefit was
found to be higher than the value of the government subsidy. This paper suggests
alternatives for designing crop insurance schemes that could improve their financial viability.

As an institutional response to agricultural risk, 1920 of his book, Agricultural Insurance: A

crop insurance exists in several countries, both
developed and developing. Agricultural risks can
take the form of output or yield risk and price
risk. Crop insurance addresses the problem of
yield risk that predominates in rainfed
agriculture. The objective of this paper is to
examine certain conceptual and operational
issues relating to crop insurance with a policy
perspective.
Crop insurance as a public policy
Crop insurance, mainly as hail insurance,
emerged in Europe, the United States, and
Canada more than a century ago. Coverage of
multiple risks was introduced by some private
companies in the U.S. in the early part of the
20th century. Public-sector crop insurance was a
later phenomenon and was introduced in
countries such as Japan and the U.S. in the
1930s. In the developing countries of Asia,
Africa, and Latin America, however, it was
introduced much later.
Crop insurance was, from the early part of
the 20th century, looked upon as an instrument
of public policy to address the problem of
agricultural risk. The pioneering work of J.S.
Ckakravarti, culminating in the publication in
Practical Scheme Suited to Indian Conditions,
was an epoch-marking event. The first half of
the 20th century witnessed pioneering studies,
conceptualization, exploration, and experiments
in the realm of crop insurance.
Optimism and excitement have been
immense regarding crop insurance as a strategy
for agricultural risk management. In the 1960s
and 1970s, policymakers and analysts envisaged
crop insurance as an effective method to enable
farmers, especially those in developing
countries, to tackle risks and thereby encourage
adoption of new technology. The target was
small farmers who are more prone to agricultural
risks and who choose more secure (though less
profitable) cropping activities. These risks also
pose a threat to their survival. Another
consideration is the link of insurance to
agricultural credit-lending institutions would
only lend to small farmers if insurance is
included in the deal. Thus, crop insurance was
chosen as a policy intervention for both
efficiency and welfare considerations.
Consequently, multiple-risk crop insurance
programs came into being in many countries.
The sense of optimism did not last very
long. Some presented “a case against crop
insurance in developing countries” (Roumasset

63
 1978). Others cautioned governments against
introducing large crop insurance schemes on the
grounds that all-risk crop insurance programs
have had a disappointing performance (Hazell et
al 1986). Similar views were expressed in the
early 1990s (Hazell 1992, Wright and Hewitt
1993). Most of these studies argue that crop
insurance programs are too costly, financially
not viable, and thrive on government subsidy.
They contend that such insurance programs do
not result in welfare gains because the cost is
much larger than the benefit.
Other studies, however, do not subscribe to
this view. An important issue is whether some
types of crop insurance programs can and do
work, even though others cannot and do not. The
view that crop insurance does not work seems to
be derived from inadequate analysis of a
particular type of scheme (i.e., public-sector all-
risk insurance, based on the individual
approach). In reality, crop insurance exists in a
variety of forms. Hail insurance has been in
existence for more than a century. Crop
insurance covering specific risks in the private
sector has shown a rising trend in recent times
(Gudger 1991). Further, some public-sector crop
insurance programs had a good financial
performance (Roberts and Dick 1991). Another
important development relates to area-yield
insurance that, according to some analysts,
provides a promising approach to a workable
crop insurance program (Dandekar 1976, Ahsan
1985, Miranda 1991, Williams et al 1993).
Two decades ago, Roumasset (1978) argued
that crop insurance as a public policy cannot be
justified using welfare economic analysis or the
results of empirical research. He said that
practically no evidence showed that farmers are
really risk-averse and that, even if they are,
formal and informal risk-sharing institutions are
already available to farmers. He further argued
that the fact that private insurance companies do
not insure crops indicates that the benefits of
crop insurance could be much less than its costs.
Some studies (Koropecky 1980, Ray 1985,
Mishra 1996) strongly rebut the arguments put
forward by Roumasset. We will not pursue this
aspect further. Suffice it to say that farmers’ risk
aversion and the need for policy intervention to
enable farmers to tackle agricultural risks are
64
well established in the recent literature.
The issues that are more relevant to public
policy are benefits and costs and operational
viability. Some studies conclude that the crop
insurance experience in developed and
developing countries has not been encouraging.
Problems related to moral hazard and cost of
administration abound. The welfare gains
intended are often not achieved. It may be noted,
however, that these studies do not suggest that
crop insurance be given up altogether. Some
prefer insurance for specific risks to all risks,
some recommend area-yield insurance, and
others advocate an increasing role of the private
sector in providing crop insurance.
Conceptual and operational aspects
Insurance is based on the law of large numbers.
It is basically a mechanism by which a large
number of individuals pool risks. It also helps
spread risk over space and time. However,
insurability of risk depends on three factors:
1. It should be possible to quantify the
probability of the event that triggers
payment of indemnity.
2. There should be substantial independence in
the occurrence of such events; otherwise, the
problem of covariability will arise.
3. It should be feasible to attribute and evaluate
the damage caused by the event.
Problems arise because of asymmetric
information resulting in moral hazard and
adverse selection. Unlike the insured, the insurer
does not possess adequate information and
collection of information involves cost. The
problem of moral hazard arises if the behavior of
those insured can affect the occurrence of an
adverse event or the amount of compensation.
The problem of adverse selection arises if the
insured knows his own risks, but the insurer
does not. The latter will determine a premium
rate on the basis of average experience. The
premium rate thus determined may be higher
than the fair premium for the low-income
individuals, who may not participate in or opt
out of the insurance.
These problems are not unique to
agricultural insurance; they exist in other forms
of insurance also. However, these problems can
be more severe in the case of crop insurance.
The cost and efforts required to gather
information are much higher because of the
vastness of the area and scattering of plots. It
may be easier to introduce insurance for
commercial crops to prosperous farmers. But the
problem of insuring low-income rural
households, who are more vulnerable to
catastrophic income losses, has remained a
challenge.
To design a scheme of agricultural
insurance, one has to look at the agricultural
situation, socioeconomic factors, and
administrative infrastructure. These aspects vary
from country to country, even across various
regions within a country. It is useful, however, to
identify certain aspects in developing and
operating agricultural insurance schemes.
Many issues need to be addressed in the
design of an operationally viable crop insurance
program. From both conceptual and operational
points of view, the following aspects are
critical1 :
1. Degree of comprehensiveness: perils to
be covered
2. Sector: public or private
3. Approach: individual or area
4. Participation: voluntary or compulsory
5. Target farmers: small and large,
borrowers and nonborrowers
6. Coverage: all or some crops
Other aspects-indemnity level, premium
rate, determination of loss, reinsurance,
marketing, and management-arerelevant to the
policy and operation of crop insurance.
Degree of comprehensiveness: perils
to be covered
A fundamental issue in the design of a crop
insurance scheme is whether to cover all risks or
certain specified risks. The former implies yield
insurance. In other words, an insured farmer is
eligible to receive an indemnity if yield is below
a certain guaranteed level. It is argued that, in
1
This part is derived from a presentation made by the author as a resource person at a seminar sponsored by the
Asian Productivity Organization on agricultural insurance held in Manila in July 1998.
the case of yield insurance, it is difficult to
identify losses arising out of uninsured events,
such as farmer negligence or poor farming
practices that are within the farmer's control.
This may lead to moral hazard in the sense that
the insured farmer will not take all possible steps
to adopt improved farming practices to prevent
or reduce damage to insured crops.
In view of the above, an alternative
approach envisages coverage against crop losses
caused by specific perils, such as hail,
windstorm, typhoon, and so on. Recent literature
indicates that more emphasis is placed on such
schemes. In Mauritius, windstorm was the only
risk covered during the first 27 years of the
scheme. In Cyprus, the risks covered are hail
and drought. In the Windward Islands, the
scheme offers coverage against wind damage
only.
The schemes being operated in Brazil,
Canada, India, Japan, Philippines, Sri Lanka,
and the United States are of the all-risk type. An
FAO (1991) study classifies, on the basis of
perils covered, crop insurance schemes into four
categories: single peril, named peril, multiperil,
and all-risk. The first category covers a single
peril such as fire, hail, or windstorm. Named-
peril schemes cover four specific perils and, in
some cases, six if two or more perils are related
(e.g., flood, excessive rains, and excessive
humidity). Multiperil schemes are those that
insure more than four perils. All-risk schemes
are sometimes included in the multiperil
category. According to the same FAO survey, the
percentages of different types of schemes are as
follows: single peril, 5%; named peril, 41%;
multiperil, 52%; and all-risk, 2%. Thus, most of
the schemes are in the named-peril and
multiperil categories.
Two aspects of crop insurance with specific
perils need special mention.
• A question may arise whether schemes
covering specified risks provide much less
economic benefit than the all-risk type. No
empirical study analyzes the relative
65
 economic benefits of schemes covering
various degrees of risk.
• At the operational level, it may not always
be possible to attribute and measure the loss
due to the insured perils. An insured crop is
exposed to a variety of natural hazards and it
is not easy to determine how much effect
each hazard has on crop yield.
Hence, one has to consider the agroclimatic
situation to determine the degree of
comprehensiveness or to identify the risks to be
covered by a crop insurance scheme. A scheme
based on named perils is feasible if the insured
crops are affected by specific perils causing
damage that is measurable. Even in such
situations, one may start with limited risk
coverage and, with experience, expand the range
of perils and the crops to be covered by an
insurance scheme. If a scheme envisages
coverage of all risks, it is necessary to provide
adequate safeguards to minimize the occurrence
of moral hazard, which may not be easy.
Public or private sector
Historically, larger crop insurance schemes have
been developed in the public sector. They are
often multiple-risk or all-risk types. Some of
these schemes are linked to agricultural credit.
An insurance scheme in the public sector has the
advantage of being able to access the
government budget and obtain the cooperation
of other public institutions and banks. The role
of the government can take various forms: (I)
the government bears fully or partly the cost of
administration; (2) the government also shares a
part of the indemnity or pays a part of the
premium with a view to ensuring that farmers
can afford to buy insurance; and (3) the
government generally underwrites the loss over
a specified level by providing capital funds (as
in the U.S.), reinsurance (as in Japan and
Canada), or through general budgetary resources
in some countries.
Agricultural insurance covers, in addition to crop insurance, insurance of forestry, sericulture, livestock,
2
poultry, and related activities.
66
There are disadvantages too, such as
interference from the bureaucracy and the
political executive, which could adversely affect
a professional approach to the operation of the
scheme.
Private agricultural insurance2 has existed
for many years in the form of hail insurance in
Europe, the U.S., Canada, and Australia. In
recent times, several private agencies have
shown interest in crop insurance which covers
cereals, pulses, forage crops, fruits, aquaculture,
flowers, forest products, tree crops, and so on.
Private-sector insurance has three
characteristics: (1) coverage of specific risks,
which are insurable, (2) an unsubsidized
premium, and (3) voluntary insurance.
Private-sector agricultural insurance is no
longer confined to Europe, the U.S., Canada,
and Australia. It has expanded to Latin America,
Asia, and even Africa, though on a very small
scale in most cases. This insurance caters mainly
to specific risks of commercial and large
farmers.
In many developing countries, insurance
institutions are not developed and are
nationalized in many cases. Consequently, there
is a dearth of diversified and experienced private
insurers with experience in other forms of
insurance. An insurance infrastructure that could
introduce agricultural insurance in the private
sector is lacking.
For crop insurance, there is quite often a
divergence between private profit and social
benefit. Crop losses during natural disasters
could be very large. Further, many farmers and
areas could be affected during a natural
catastrophe. For these reasons, it may not always
be feasible to have private-sector insurance.
For some types of agricultural insurance,
private insurers with experience and expertise
will be willing to participate. For other activities,
particularly those addressing small farms and
less developed agriculture, the role of the public
sector will be important if there are larger
economic benefits. An alternative is to have a
parastatal body with autonomy and
independence, which should operate on sound
principles of insurance.
Individual or area approach
Assessment of indemnity is a critical element of
any insurance scheme. Two main approaches are
used to determine indemnity in crop insurance:
the individual approach and the area approach.
In the individual approach, loss is assessed
separately for each insured farmer, for each plot
or for the farm as a whole (consisting of more
than one plot at different locations).
In the area approach, indemnity is
determined not separately for each farmer but
for a group of farmers. The insured farmers are
indemnified on the basis of the average loss
experienced by a specified homogeneous area,
which could be a district, a block, or even a
village. Halcrow suggested this approach in
1949 while evaluating the U.S. Crop Insurance
Program’s first decade of operation.
Subsequently, Dandekar gave it a concrete shape
in the Indian context (Dandekar 1976). In fact,
Chakravarti (1920) advocated an area approach
as early as 1920 in his drought insurance scheme
for Mysore State.
The area approach reduces the problem of
moral hazard-actionof the insured affecting
indemnity-andcan consequently allow the
insurer to provide a larger range of risk
coverage. Further, because the indemnity will be
uniform for all insured farmers in an identified
region, the problem of adverse selection in the
sense that farmers facing below-average risk
will tend to opt out of the insurance program
may be less. This is because all farmers are
indemnified. The administrative costs are much
less because there is no need for field inspection
and loss assessment with respect to individual
plots of land. However, certain problems are
inherent with this approach. Farmers may be less
interested in buying insurance if individual farm
yields are not adequately correlated with average
area yield of the region. Further, it may be
difficult to insure damage, which affects an area
smaller than the specified area unit. Covaria-
bility can also be a problem. When the average
yield is less than the guaranteed yield, all the
farmers will have to be paid indemnity
simultaneously.
In the context of the area approach, it is
suggested that rainfall insurance could be
introduced (Mishra 1995). Indemnity will
depend on the average rainfall for a region. It
may be easier to measure rainfall than average
yield. Another advantage of rainfall insurance is
that it would, unlike a single crop, reflect the
income outcome of all the crops.
The individual approach is more common
among the existing crop insurance programs. It
is more acceptable and appealing to farmers, but
it involves a higher administration cost and is
more prone to the problem of moral hazard. On
the other hand, the area approach is easier and
cheaper to operate, but it has many limitations.
The choice of either the individual or area
approach depends on the nature of the
agricultural insurance program and the
agroeconomic conditions: target farmers, farm
size, crops insured, and even communication
facilities. For example, the individual approach
is more suitable for commercial and high-
yielding crops, whereas the area approach is
easier to operate with small farms spread over
large tracts.
Participation: voluntary or
compulsory
Participation in a crop insurance scheme may be
voluntary or compulsory. In the voluntary
approach, participation is optional for a farmer
who is eligible to be insured; examples are the
schemes in Canada, the U.S., and Chile. In
compulsory participation, certain categories of
farmers who are eligible to be insured or who
grow specified crops participate automatically.
The word “compulsory” implies that there is a
system of automatic insurance for a group of
farmers. In Japan, crop insurance is compulsory
for all farmers who are growing the insured crop
over more than a minimum prescribed area. The
Mauritius, Cyprus, and Windward Islands
schemes are compulsory for all growers of
certain crops. In India and the Philippines, crop
insurance is compulsory for farmers who borrow
from banks and other financial institutions.
67
 The compulsory approach has two
advantages. The problem of adverse selection is
minimized significantly and the cost of sale of
insurance is reduced. There may, however, be
dissatisfaction among low-risk farmers who will
have to cross-subsidize high-risk farmers.
Under certain circumstances, it may be
expedient to provide compulsory insurance for
small farmers with a view to preventing adverse
selection and high administrative cost, but it will
be necessary to provide incentives to counter the
moral hazard problem.
Target farmers
A report by the United Nations Conference on
Trade and Development (cited in Goenka 1996)
examines the role and viability of agricultural
insurance in the context of the following
categories of agricultural operation:
1. Traditional or subsistence
2. Semicommercial
3. Commercial
4. Specialized production systems
This general classification may vary across
countries. Further, there may be some overlap
among the subsectors and it may be difficult to
have an exclusive classification of farmers. Yet,
the above categorization can help us to focus on
some issues relating to the design of agricultural
insurance schemes.
The last category includes activities such as
those found on horticultural farms, aquaculture
farms, and poultry farms, and in orchards. This
subsector adopts improved technology, has
access to institutional financing, and has a
commercial orientation. There is scope for
expanding agricultural insurance here and so it is
in this subsector that private insurance has
already shown interest.
The commercial subsector has medium and
large farms, which are integrated with the
market. They are commercially viable and risks
are insurable. One can follow an individual
approach. In this case also, there is tremendous
scope for private-sector insurance.
The semicommercial system consists of
small- and medium-sized holdings, which are in
transition from traditional to commercial
68
agriculture and offer opportunities for private
insurers. However, there is scope for public-
sector insurance to operate viably. This sector
can pay a fair premium.
Farmers with small holdings who usually
employ family labor and produce primarily for
self-consumption are in the traditional or
subsistence sector. They are most vulnerable to
agricultural risks and need insurance the most.
However, the basic criteria of insurability may
not be satisfied in the conventional sense. It is
for this sector that insurance, though not
financially viable, can yield substantial
economic benefits in the sense that the extra
value added is more than the cost of the scheme.
In many developing countries, public-sector
programs try to address this sector, which poses
the greatest challenge. Private-sector insurance
might not be feasible in this sector. Also not
viable is a scheme based on the individual
approach. Rainfall insurance could also become
relevant in certain agroclimatic situations.
Coverage of crops
The basic objective of agricultural insurance is
to stabilize farmers’ income. Logically, all crops
grown by a farmer should therefore be covered
by insurance. In the literature, there is a
suggestion for combined crop insurance instead
of a scheme based on individual crops. In
practice, it is not feasible to cover all crops.
Indeed, during the initial years, the scheme was
limited to some crops; it expanded gradually to
other crops depending on the experience and
ability of the implementing agency.
To maximize benefits, the selection of the
crop or crops to be covered should depend on
the importance of such crops to the economy
and farmers.
Some of the criteria are as follows:
• The crop is important in providing food
security to farmers.
• It is necessary to increase production of the
crop, keeping in view the strategy for
economic development.
• The crop is marketed and many farmers
grow it so that risks are spread.
• Time-series data on crop yields and crop
losses are available.
 As discussed earlier, crop insurance is more
viable if coverage is for commercial crops. It is
more difficult to insure crops that are used for
self-consumption and there is no linkage with
the market or with credit institutions.
Some empirical aspects
All-risk crop insurance schemes, in both in
developed and developing countries, are often
not financially viable and depend heavily on
government subsidy. The subsidy ranges from
25% of indemnities in the U.S. to 50% and 80%,
in Brazil and Mexico, respectively (Hazell et al
1986). More recent data reveal that the subsidy
has grown to about 65% in the U.S. In Japan, the
government has financed more than 90% of the
cost of the crop insurance program (Hazell et al
1986). In the case of the Comprehensive Crop
Insurance Scheme (CCIS) of India, government
subsidy from 1985 to 1995 was 84% of the total
cost of the scheme (Mishra 1996). On the other
hand, crop insurance programs covering specific
risks have been financially more viable.
Mauritius has operated such a scheme
successfully since 1946. The long experience
with hail insurance was mentioned earlier.
A question arises whether some economic
benefits could justify the existence of crop
insurance schemes, even for all-risk types. Some
recent studies touched on this issue.
The Agricultural Credit Policy Council of
the Philippines evaluated the performance of the
crop insurance program during the first-eight
years since its introduction in 1981. The results
indicate that insured farmers have higher
incomes than uninsured farmers. Further,
income fluctuations are lower for insured
farmers than for uninsured ones (Faustino 1998).
Mishra (1996) analyzed the impact of the
CCIS on farm inputs, outputs, and income based
on 1990-9 1 farm-level data from Gujarat,
Orissa, and Tamil Nadu (150 households in
Gujarat and 158 each in the other two states).
Analysis of farm-level data from Gujarat
indicated that an increase of Rs 806 per ha in
annual net farm income—at 1990-91 prices—
could be ascribed to the CCIS. The
corresponding figures for Orissa and Tamil Nadu
were Rs 520 and Rs 1,647, respectively. The
average cropping area insured per annum in
India during 1985-95 was 8.02 million ha.
Taking the lowest of the per hectare increases in
income, Rs 520, and multiplying it by the area
figure, one can estimate the annual benefit of the
CCIS in terms of an increase in net farm
income—Rs 4.17 billion for the country as a
whole. This estimate needs to be viewed with
some caution. It is based on farm-level data for
1990-91, thereby implying that the same level of
benefits accrued over all years and in all areas. It
is an overestimate, to the extent that the increase
in net farm income was lower during other
years, particularly in earlier years. Furthermore,
the sample may not be representative of all areas
of the country.
Three other studies—based on data from
south India—found that crop insurance had
positive effects on crop inputs, output, and
income. Mosley and Krishnamurthy (1995) used
data for the 199 1-92 crop year from 280 farmers
from two districts, Sanga Reddy and
Mahboobnagar, of Andhra Pradesh. The analysis
was based on comparisons of “with” and
“without” situations. The finding was that
insured farmers spent more, relative to the
uninsured, on fertilizers, pesticides, and minor
irrigation, and they obtained higher farm
income. Regression analysis indicated that the
CCIS is associated with an increase in net
income of Rs 520 per farmer.
The annual average number of insured
farmers for the period studied by Mishra was
4.67 million, similar in magnitude to that studied
by Mosley and Krishnamurthy. Assuming an
increase of Rs 520 per farmer in net farm
income, the benefit to 4.67 million farmers can
be estimated at Rs 2.43 billion a year for India
as a whole.
The CCIS involved a total cost-indemnity
and administration expenses—of Rs 12.58
billion during 1985-95, based on cumulative
figures at current prices for different years. At
1990-91 prices, the cost would be Rs 13.49
billion. which implies an average annual cost of
Rs 1.35 billion. Even if we take the estimate of
Rs 2.43 billion as the annual benefit of the
CCIS, it is significantly more than the
government subsidy.
69
 Santhi (1991) studied 90 farmers—covered
by the CCIS—from the Agastheeswaram block
of Kanyakumari District in Tamil Nadu. The
analysis involved “before” and “after”
comparisons, the latter represented by the 1986
and 1987 kharif seasons. The percentage of
farmers who use high-yielding variety (HYV)
seeds increased from 57% before the CCIS to
80% after the CCIS. The use of fertilizers N, P,
and K increased in physical quantities. More
labor was also used. Of course, in a “before” and
“after” comparison, it is not possible to attribute
all or part of this positive effect solely to crop
insurance.
Subramanian (1986), studied the Pilot
Scheme of Crop Insurance, which operated from
1979-80 to 1984-85. Subramanian studied a
sample of 90 farmers from Madurantakam taluk
of Chengalpattu District in Tamil Nadu for the
crop year 1984-85. Following a “with” and
“without” approach with 60 insured and 30
uninsured farmers, he found that the insured
farmers had more area under HYVs and used
more certified seeds and more fertilizers. There
was no significant difference in the use of plant
protection chemicals. The insured farmers used
more labor. These differences are in terms of
both quantity and expenditure. The insured
farmers had a significantly higher yield of rice.
In the regression analysis, the crop insurance
dummy variable was significant.
If the benefit of the CCIS in net farm
income is significantly more than the cost of the
scheme, should not the entire cost be charged to
the insured farmers through a higher premium?
The average annual cost of the scheme during
1985-95 was Rs 1.35 billion versus a premium
income of Rs 198.5 million, which is 1.7% of
the sum insured, at constant 1990-91 prices. For
the scheme to be self-financing, the premium
should have been 11.4%; in other words, it
needed to be raised to 6.7 times the present rate.
Because of adverse selection, this would not be
feasible, especially for a scheme based on an
area approach. Here, all farmers neither face
similar risk situations nor derive the same
amount of benefit. A higher premium rate would
lead to less demand for insurance if it were
voluntary, and to resentment, on the part of
farmers, if it were compulsory.
70
This does not mean that premium rates
cannot be raised. The point is that the premium
can be raised moderately. Nevertheless, in most
situations, it would not meet the total cost of the
scheme. Consequently, it is necessary to
reexamine the design aspects of the scheme
itself to ascertain whether there is scope to
improve its financial performance and reduce its
operational problems.
Concluding remarks
This paper has attempted to analyze, with a
policy perspective, certain basic issues relating
to crop insurance. In the early part of the 20th
century, crop insurance emerged as an important
instrument of public policy to tackle the problem
of agricultural risks. Later, some analysts
questioned the relevance and efficacy of crop
insurance—though there was never any
unanimity—derived from theoretical
formulations and empirical research. The
scenario has changed, however, in recent times.
The relevance of crop insurance as a policy
instrument has gained acceptance because the
problem of risk aversion by farmers is well
recognized and some empirical studies show that
crop insurance can yield economic and social
benefits that outweigh the cost involved.
This does not mean that the groundwork is
made easier. Issues of practice and operation still
remain. Problems of moral hazard and adverse
selection arising on account of asymmetric
information need to be solved. Operational
issues and financial sustainability of crop
insurance programs are to be addressed. This
paper has analyzed some of these aspects and
has suggested alternatives for designing crop
insurance programs that could be more
sustainable.
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Crop insurance for agricultural
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Baltimore, Md (USA): The Johns Hopkins
University Press.
Koropecky O. 1980. Risk sharing, attitudes and
institutions in the rural sector: a critique of a
case against crop insurance in developing
countries. FCIC, Washington, D.C.
Miranda MJ. 1991. Area-yield crop insurance
reconsidered. Am. J. Agric. Econ. 73(2):233-
242.
Mishra PK. 1995. Is rainfall insurance a new
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Pol. Wkly. 30(25):A84-88.
Mishra PK. 1996. Agricultural risk, insurance
and income: a study of the impact and
design of India’s comprehensive crop
insurance scheme. Vermont (USA): Ashgate
Publishing Co.
Mosley P, Krishnamurthy R. 1995. Can crop
insurance work? The case of India. J. Dev.
Stud. 31(3):428-450.
Ray PK. 1985. Economics of crop insurance
with special reference to the needs and
situations in developing countries. Calcutta:
Central Publishing Concern.
Roberts RAJ, Dick WJA, editors. 1991.
Strategies for crop insurance planning. FAO
Agricultural Services Bulletin 86. FAO,
Rome.
Roumasset JA. 1978. The case against crop
insurance in developing countries. Philipp.
Rev. Bus. Econ.l5(1):87-108.
Santhi S. 1991. Comprehensive crop insurance
scheme in Agastheeswaram Block of
Kanyakumari District: an economic
appraisal. MS dissertation, Tamil Nadu
Agricultural University (Department of
Agricultural Economics), Coimbatore. India.
Subramanian P. 1986. Crop insurance for
agricultural development: an economic
appraisal in Madurantakam Taluk of
Chengalpattu District. MS dissertation.
Tamil Nadu Agricultural University
(Department of Agricultural Economics),
Coimbatore, India.
Williams JR, Carriker GL, Barnaby A, Harper
JK. 1993. Crop insurance and disaster
assistance designs for wheat and grain
sorghum. Am. J. Agric. Econ. 75(2):435-
447.
Wright BD, Hewitt JA. 1993. Crop insurance for
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Notes
Author’s address: Gujarat Electricity Board,
Baroda, Government of Gujarat, India.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems.
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
71
The nature and causes of changes in variability of
rice production in eastern India: a district-level
analysis

S. Pandey and S. Pal

The likely effect of the adoption of modern varieties and production practices on variability of
production has been widely debated. This paper examines the nature of changes in variability
of rice production in eastern India between 1969-81 and 1982-94. Aggregate data on
production, yield, and area from 71 rice-producing districts of eastern India are analyzed
using a variance decomposition method. The variance of yield and production was found to
have increased, with increasing interdistrict correlation as a major contributing factor.
Production variability, measured by the coefficient of variation, however, showed a declining
trend in several states. Changes in the coefficient of variation of yield were explained mainly
by the changes in the coefficient of variation of rainfall. Various factors that may have altered
the variability of rice production in eastern India are discussed. In contrary to the conventional
belief, modern varieties can be less risky than the traditional varieties. The coefficient of
variation of production decreased in districts where rice yield increased rapidly, indicating that
improvements in rice yields can be achieved without increasing instability.

It is now widely accepted that the spread of
improved technology consisting of high-yielding
varieties and associated crop management
practices has been the main source of growth in
food- grain production in Asia over the past two
decades. What is still debatable is the effect on
the variability of production. If growth arising
from the adoption of improved technology has
increased the instability of production around
the trend, appropriate policies to reduce-food
shortages when production dips below the trend
may be needed. In addition, agricultural research
priorities may need to be altered to emphasize
those components of technology that have
stabilizing effects so that any trade-off between
growth and instability may be reduced.
The possibility of increased production
instability with an increase in yield was first
raised in the late 1960s in the context of food-
grain production in India (Sen 1967, Rao 1968).
Sen ( 1967) suggested that production variability
is likely to increase if output growth is achieved
through an expansion of cultivation to marginal
areas. In addition, he hypothesized that
production instability will tend to rise with an
increased use of purchased inputs such as
fertilizers. As the price elasticity of supply
increases with an increase in the share of
purchased inputs, the effect on output of a given
level of instability in prices will be amplified.
Since yield tends to be a more unstable
component of output than area, Rao (1968)
suggested that production variability is likely to
increase with the increasing importance of yield
growth as the source of output growth. Several
other researchers have associated the increase in
variability of food-grain production in India with
the spread of modem varieties (Mehra 1981,
Barker et al 1981, Griffin 1988).
Based on a variance decomposition method,
Hazell (1982) found that the variance of cereal-
grain production in India has increased over
time. However, the increase in variance was
found to be not due to the adoption of high-
yielding varieties (HYVs) per se but due to the
instability in input supplies. In a subsequent
analysis, Hazell (1984) suggested that increased
interregional correlation of output due to
similarity of varieties grown may have
contributed to increased production variance.

73
 Walker (1989) found the adoption of HYVs of
sorghum and pearl millet to be a major
contributing factor to increased production
variability of these crops. Anderson and Hazell
(1989) reported that the variability of world
food-grain production, measured by the
coefficient of variation (CV), increased between
the 1960s and the 1970s, although the variability
for some crops and some regions decreased.
Using district-level data from India, Singh and
Byerlee (1990) found that the CV of wheat yield
decreased over time, mainly because of the
expansion of irrigation. Based on this result,
they hypothesized that the increase in variability
reported in earlier studies might partly reflect the
disequilibrium that characterizes the initial
periods when new technologies are introduced.
Such instability tends to disappear over time as
farmers learn more about the technologies and
adjust their production systems.
In a more recent study, Naylor et a1 (1997)
reported that the production variability of maize
has increased over the past three decades. Their
results also indicate that the production
variability of wheat and rice declined initially
but has shown a tendency to increase in the more
recent period (1980-94). They attribute this
tendency toward an increase in instability for
rice and wheat to the near full exploitation of the
potential of the Green Revolution technology
and a tapering off of investment in irrigation.
The diversity of results on the pattern of
changes in production variability implies that the
factors that govern production instability vary
across crops, locations, and time periods. Hazell
(1982) conducted a major study of changes in
production variability of rice for India using
state-level data up until 1977. The diffusion of
Green Revolution technology for rice in
irrigated areas such as Punjab, Haryana, and
Tamil Nadu was well advanced by 1977.
However, the productivity growth in eastern
India where more than 17 million ha of rice are
grown under rainfed conditions, started only in
the early 1980s. The impact of productivity
growth on the variability of rice production in
eastern India in recent years has not been
adequately analyzed. Eastem India is
characterized by a high degree of dependence on
74
rice production, a high level of poverty, and a
high population pressure. An improvement in
food security in eastern India critically depends
on the stability of rice production. The aim of
this paper is to analyze the changes in
production variability in eastern India during
1969-94 using both state- and district-level data.
Method and data
Eastern India comprises eastern Uttar Pradesh,
eastern Madhya Pradesh, Bihar, Orissa, West
Bengal, and Assam. In the first part of this paper,
in which growth patterns are examined, data on
rice yield, area, and production for the period
1961-97 are included. As there was a clear
change in the productivity trend after 1981, data
were divided into two segments: before 198 I
and after 198 1. Growth rates for each period
were estimated using a semilogarithmic trend.
Changes in instability of rice production, area,
and yield were examined by comparing changes
in variance and the coefficient of variation.
The second part of the analysis, which
involves a decomposition of the change in
variance, covers from 1969 to 1994. The choice
of this period is based on the availability of
district-level data. Assam was excluded from the
analysis as district-level data for this state were
not available at the time of writing this paper.
Seventy-one districts from the remaining five
states of eastern India were included in the
analysis. For comparative purposes, the analysis
has been conducted also for northern India
(Punjab and Haryana) and southern India
(Andhra Pradesh, Kamataka, and Tamil Nadu),
which are now believed to be in the post-Green
Revolution phase (Byerlee 1995). Broadly,
eastern India represents the rainfed environment,
whereas northern and southern India represent
irrigated environments.
Hazell’s (1982) variance decomposition
analysis basically consists of decomposing the
change in production variance between the two
periods into 10 components (Appendix 1). The
first two components capture the effect of
changes in mean yield and mean area,
respectively. The third and fourth components
measure the effect of changes in yield and area
variances, respectively. The sixth component
measures the contribution of change in area-
yield covariance. The fifth and remaining three
components measure the effect of various
interaction terms. The final term is the residual
that captures the effect of higher order
interactions. The changes in mean production
can similarly be decomposed into the change in
mean yield, change in mean area, change in
area-yield covariance, and an interaction term.
To apply Hazell's variance decomposition
method, the total time span covered by the data
was divided into the first (1969-81) and second
(1982-94) periods, with each period having 13
years. Data on rice yield and area for each
district were detrended separately for each
period using linear trends. For each variable, the
residuals of the trend equation were added to the
mean of the data series to generate detrended
data centered on the mean. The analysis thus
implicitly assumes that expectations regarding
the output remain constant over time at the level
denoted by the mean (Bindlish 1988). The
detrended production was obtained by
multiplying detrended yield and detrended area.
The final analyses were conducted using these
detrended data.
Eastern India is a large rice-growing area
with a high degree of variation in agroclimatic
conditions within and across states. The effects
of broader variation in agroclimatic conditions
were partially accounted for by using
agroclimatic zones rather than the state as the
basic unit for analysis. Using the agroclimatic
zonal classification developed by the Planning
Commission of India, the five states of eastem
India can be grouped into 10 agroclimatic zones
(Planning Commission 1989). Table 1 lists the
relative importance of these 10 zones in terms of
rice area and production in eastern India as a
whole and the major agroclimatic features of
each zone. The geographical coverage of these
zones is shown in Figure 1. Because the last
three regions have small shares in area and
output, they were excluded from the analysis.
In the third part of this paper, the factors
that explain the changes in rice production
variability between the two time periods are
analyzed. In addition, attempts are also made to
explain the differences in variability across
districts.
For the state-level analysis, all districts in a
state were included, except for eastern Uttar
Pradesh and eastern Madhya Pradesh. Districts

Table 1. Major characteristics and percentage share of eastern Indian rice area and production by agroclimatic zone
(triennium 1992-94).

% share Main feature

Zone
Area Production Rainfall (mm) Climate Soil type

Middle Gangetic Plains

Northwest Alluvium 11 13 1,211 Moist to dry Alluvial and
subhumid calcareous
Northeast Alluvium 14 11 1,470 Dry to moist Alluvial plains
subhumid
Lower Gangetic Plains 22 32 1,587 Moist and dry Red and
subhumid yellow alluvial
Eastern Plateau and hills
Eastern Plains 16 15 1,271 Dry subhumid Medium to
deep black,
red and yellow
Eastern Highlands 8 6 1,436 Moist to dry Red sandy,
subhumid red and yellow
Plateau 14 10 1,369 Moist to dry Red and
subhumid yellow, and
red loamy
Eastern Coastal Plains 8 8 1,287 Moist Alluvial laterite
subhumid and red loamy
Central Plateau and hills 2 1 1,130 Dry subhumid Medium black
Eastern Himalayas 3 2
Upper Gangetic Plains 2 2
Eastern India 100 100

Source: Planning Commission (1989).

75
belonging to other geographical regions of these
two states were excluded. Appendix 2 lists the
districts included from each state. For the
analysis by agroclimatic zones, various districts
belonging to an agroclimatic zone were grouped
together.
As there are different statistical descriptors
of variability, a short digression on the
appropriate measure in the context of the present
study may be useful. Variance (or standard
deviation) is a commonly used indicator of
dispersion around the mean. However, it is not a
dimensionless measure and estimates of variance
between the two periods may change merely
because the level of production has also
changed. For comparative purposes, we need a
measure that represents variability relative to the
magnitude of variation. The coefficient of
variation (CV) is such a measure. The
decomposition of the coefficient of variation
into its constituting sources, however, is
mathematically cumbersome. In addition, such a
76
decomposition of the CV does not provide any
information additional to what the
decomposition of variance provides.
Accordingly, the comparison of instability over
time in this study is based mainly on CV,
whereas the analysis of sources of variation is
based on the decomposition of variance.
Both the variance and CV ignore
information about the probability distribution
contained in moments higher than the second
moment. For this reason, these summary
descriptors of variability are inadequate when
judgments about “riskiness” of alternative
technologies are needed. In the absence of a
clearly defined utility function, stochastic
dominance analysis (Anderson et al 1977) offers
a convenient way of ranking technologies based
on the concept of risk efficiency. The stochastic
dominance analysis is used in this paper to
provide information on the relative riskiness of
traditional and modern varieties.
Patterns of growth in rice production
in eastern India
Eastern India is a major rice-growing area of
India that accounts for more than two-thirds of
the rice area and more than half of rice
production. Figure 2 shows the trends in area,
production, and yield of rice in the period 1961 -
97. The trends in yield and production show a
clear break during the early 1980s. Production
growth during 1961-81 was driven primarily by
the expansion in area as yield growth was almost
negligible. Rice yield increased dramatically
after 1981 as the spread of modem varieties in
eastern India increased. Table 2 shows the
growth rates in area, production, and yield
during 1961-81 and 1982-97 for eastern India.
The growth rate in yield, which was below 1%
during 1961-81, increased to 3.1% during 1982-
97. This increase in productivity has been the
main driving force behind the growth in rice
output in eastern India.
) in eastern India.
Of the five states of eastern India analyzed,
Uttar Pradesh and West Bengal are the two that
have shown a strong growth in rice production
since the early 1980s. Output growth in these
states during 1982-97 exceeded 4% per year.
Growth in yield contributed more than 75% of
the growth in output in these states. Other states
of eastern India also recorded a higher rate of
growth during 1982-97 relative to 1961-81.
Even Bihar and Orissa, which had a relatively
low productivity, recorded a yield growth of
more than 2% per annum during 1982-97. Table
3 summarizes the major characteristics of rice
production systems for these five states. Overall,
Uttar Pradesh and West Bengal are the leading
states in rice productivity, fertilizer use, and
adoption of modem varieties. The expansion of
tubewell irrigation, rapid adoption of modem
HYVs, and expansion of summer (boro) rice
cultivation are the major reasons for the increase
in productivity in these states. Other states are
also experiencing a similar change but at a
slower pace.
77
Table 2. Growth rates (% y-1) of area, yield, and production southern India, the variance of area sown
of rice in various parts of eastern India.
remained almost constant between the two
State 1961-81a 1982-97a periods. The change in the variance of yield in
Assam eastern India is also positive but not statistically
Area 1.08** 0.78' significant. A smaller percentage increase in the
Yield 0.59** 1.81"
Production 1.67** 2.59"
variance of production than in the change in
Bihar variance of area is indicative of some
Area 0.26 -0.18
compensatory movements in area and yield in
Yield 0.79 2.83*
Production 1.06 2.65* eastern India. Although the changes in area and
Madhya Pradesh yield variances in northern India are negative
Area 0.79** 0.61**
Yield 0.40 1.31 and statistically insignificant, the production
Production 1.19 1.91* variance increased by 231%. This indicates the
Orissa
Area 0.03 0.52** existence of a covariate movement in area and
Yield -0.06 2.52* yield in northern India. For southem India, the
Production -0.04 3.04*
Uttar Pradesh
production variance changed very little. Within
Area 1.02** 0.43 eastern India, the variance of area, yield, and
Yield 2.02* 3.93** production increased significantly in Bihar. In
Production 3.04** 4.37**
West Bengal eastern Uttar Pradesh, the variance of area
Area 0.81** 1.11** increased but that of yield and production
Yield 0.91** 3.81**
Production 1.73** 4.92** remained unchanged. In all other states, the
Eastern India variances of yield, area, and production
Area 0.63** 0.53**
Yield 0.79 3.07** remained unchanged between the two periods.
Production 1.42** 3.60** Although variance of production increased
a
**, * = significant at 5% and 1% level, respectively.
in eastern India, the relative variability as
measured by the coefficient of variation
decreased slightly (Table 5). The decline in the
Analysis of instability CV of production is much larger in northern and
southern India. However, these reductions in
Estimates of changes in variances of rice yield, CVs are not statistically significant. Overall, the
area, and production for eastern, northern, and absolute variability in production increased, but
southern India are presented in Table 4. The the relative variability has remained more or less
production variance in eastern India increased constant between the two periods in all three
by 60% between the two periods. A feature of regions of India. A statistically significant
the growth in rice production in eastern India decline in the CV of yield is observed in eastern
has been the increase in area variance by 157%. Uttar Pradesh only (Table 6). The relative
This increase in area variance is statistically variability of area, yield, and production
significant at the 5% level. In both northern and remained unchanged in Orissa, Madhya Pradesh,

Table 3. Features of rice production in eastern India.

Average rice % rice area % high- Fertilizer Cropping

State yield (t ha-1)a irrigatedb yielding variety use intensitye
areac (kg ha-1)d

Uttar Pradeshf 3.18 62.3 88 107.6 149

Madhya Pradeshf 1.52 23.7 63 39.4 125
Bihar 2.12 40.2 60 79.6 137
Orissa 1.82 35.5 66 25.8 134
West Bengal 3.33 27.2 74 102.8 159

aRice yield is the average of 1996-97 and 1997-98 yield. Yields are expressed in this paper in terms of rough rice. Source: DES (1999). bFor the
year 1995-96 except for Orissa (1993-94) and West Bengal (1988-89). Source: FAI (1999). cFor 1995-96. Source: FA1 (1999). dTotal of NPK per
hectare of gross cropped area for the year 1996-97. Source: FAI (1999). eFor 1994-95. Source Fertilizer Statistics 1997-98. Cropping intensity is
defined as the ratio of gross cropped area to net sown area. fData refer to the whole state, not just its eastern region.

78
Table 4. Estimates of changes in variance between 1969- agroclimatic zones (Table 7). A comparison of
81 and 1982-94.
CV of production for the second period across
% change in variance relative the agroclimatic zones indicates that the
to the first period
Item
variability is highest in the Northeast Alluvium
Eastern India Northern India Southern India and in the Eastern Coastal Plains. High
-29.0 19.7
instability of yield is the major cause for high
Area 156.7 a

Meld 11.4 -50.7
a
Production 60.4 231.3
a Statistically significant at the 5% level.
and West Bengal. In Bihar, the CV of production
increased mainly due to an increase in the CV of
area.
When state-level data are classified by
agroclimatic zone, the patterns for the Northwest
Alluvium (the Uttar Pradesh Plains) and the
Northeast Alluvium (the Bihar Plains) were the
same as those of the corresponding state-level
analysis. Of the seven zones, yield variance
increased significantly in the Northeast
Alluvium and the Eastern Coastal Plains. For the
Eastern Highlands, the yield variance declined
significantly. For all other zones, the change in
yield variance was not statistically significant.
The area variance increased significantly in the
Northwest Alluvium and the Northeast Alluvium
but declined significantly in the Eastem
Highlands. There was no significant change in
the area variance in other zones. The production
variance increased significantly only in the
Northeast Alluvium and the Eastern Coastal
Plains. In terms of CV, major changes in
production instability occurred in the Northwest
Alluvium (-33%), the Northeast Alluvium
(+93%), and the Coastal Plains (+68%). The CV
of production changed very little in other major
-38.1 CV of production in these two zones. For the
-9.0 Northeast Alluvium, the area variability is also
higher than in the other zones. The Lower
Gangetic Plains had the lowest CV of
production. Surprisingly, the CV of production
in the Northwest Alluvium was similar to that in
the Plateau, despite the larger irrigation facility
in the former. The Northwest Alluvium is also
characterized by high instability in area.
As the comparison of variability between
two time periods can be sensitive to the cutoff
point between the periods, a 10-year moving CV
of yield, area, and output was estimated to
examine the trend in CV. When calculating the
moving CV, the first 10-year period was for
1969-78. The data for this period were linearly
detrended and the CV was calculated using the
detrended data. For the next period, the data for
1969 were dropped and those for 1979 were
included. The CV was calculated again using the
detrended data. This process was repeated until
all data were used.
The results indicate that the CV of yield
started to decline for most states after the period
1975-84 (Fig. 3A). Eastern Uttar Pradesh had
the sharpest decline in yield instability. Yield
variability declined in Madhya Pradesh and West
Bengal also, although the CV of yield remained
almost twice that in West Bengal for the recent
periods. Bihar and Orissa are the two states
where instability either increased or remained

Table 5. Estimates of coefficients of variation of area, yield, and production by region. a

Eastern India Northern India Southern India

Item
1969-81 1982-94 1969-81 1982-94 1969-81 1982-94

Area 1.8 2.8 10.7 4.1 3.7 4.1

(53.6) (-62.3) b (11.6)
Yield 10.0 7.4 8.8 4.6 7.4 4.2
(-26.1) (-48.0) (-43.4)
Production 11.2 9.5 12.0 7.0 7.9 5.5
(-15.0) (-39.8) (-30.0)
a Numbers in parentheses measure the percentage change in CV in the second period relative to the first period. b Change in CV significant at the
5% level. The statistical test is based on t-statistic as suggested by Anderson and Hazell (1989).

79
 Table 6. Coefficients of variation in area, yield, and production by state.

Area Yield Production

State
1969-81 1982-94 1969-81 1982-94 1969-81 1982-94

Eastern Uttar Pradesh 4.1 6.6 (61)b 19.2 6.6 (-66)b 20.4 11.7 (-42)
Eastern Madhya Pradesh 0.7 0.9 (42) 20.1 11.1 (-44) 20.3 11.6 (-43)
Bihar 4.2 7.4 (77)b 10.9 15.9 (46) 12.1 20.4 (68)b
Orissa 3.5 2.8 (-21) 12.5 12.6 (1) 13.8 14.7 (6)
West Bengal 3.4 2.5 (-26) 8.0 6.8 (-14) 10.0 8.2 (-18)

a Numbers in parentheses indicate percentage change relative to the first period. b Statistically significant at the 5% level.

Table 7. Coefficients of variation in area, yield, and production by agroclimatic zone.a

Area Yield Production

Agroclimatic zone
1969-81 1982-94 1969-81 1982-94 1969-81 1982-94

Middle Gangetic Plains

Northwest Alluvium (Uttar Pradesh) 3.9 7.4 (88)b 18.6 7.2 (-61)b* 19.6 13.1 (-33)
Northeast Alluvium (Bihar) 4.6 8.6 (90)b 11.6 16.0 (38) 11.1 21.5 (93)b
Lower Gangetic Plains (West Bengal) 3.2 2.5 (-21) 8.2 6.7 (-16) 10.1 8.1 (-20)
Eastern Plateau and hills
Eastern Plains (Orissa + Madhya Pradesh) 1.7 1.5 (-1 3) 18.9 10.1 (-46) 19.2 11.4 (-41)
Eastern Highlands (Orissa + Madhya Pradesh) 2.9 1.0 (-68)b 18.5 9.3 (-50) 19.4 9.6 (-50)
Plateau 2.9 2.8 (-6) 13.6 12.8 (-6) 16.0 14.7 (-8)
Eastern Coastal Plains 3.3 3.7 (12) 10.6 16.1 (52) 11.1 18.6 (68)b
Eastern India 1.8 2.8 (53.6) 10.0 7.4 (26.1) 11.2 9.5 (-15)

aNumbers in parentheses indicate percentage change relative to the first period. bStatistically significant at the 5% level.

constant except in the more recent periods. The
result for the moving CV of area (Fig. 3B)
indicates a clear pattern of increase in area
instability in Uttar Pradesh. Area instability in
Bihar has remained high throughout the period,
although it seems to have increased slightly in
recent years. The temporal pattern in production
instability follows that of yield instability.
Production instability has shown a declining
trend in all states except Bihar (Fig. 3C). The
moving CVs for different agroclimatic zones
also confirm the overall pattern of declining
instability in yield over time for all other zones.
The moving CV of production mirrors that of
yield. The CV of area displays patterns similar
to that in the state-level analysis. The Northeast
Alluvium zone and the Coastal Plains of Orissa
are the only two zones where production
instability has increased.
Based on these results, we can conclude that
the proportionate growth in mean production in
most parts of eastern India has more than
compensated for the increase in the standard
deviation of production, resulting in a decline in
its CV. Overall, the output growth in eastern
Indian rice production appears to have been
achieved at a reduced relative variability. even
though the absolute variability has increased in
most cases.
Variance decomposition analysis
In eastern India, the change in the variance of
yield and the change in the covariance between
area and yield account for a major share (i.e.,
60%) of the increase in variance between the
two periods (Table 8). In contrast, the major
share of change in production variance is
contributed by the change in mean area in
northern India. Change in yield variance had a
slightly stabilizing effect in northern India due
mainly to the availability of assured irrigation.
Increased covariance between area and yield
also contributed to a quarter of the increased
production variance. For southern India, the
change in variance of area had the most
stabilizing effect on production variance. The
change in the variance of yield had a
destabilizing effect. There was also evidence of
the stabilizing effect of the change in covariance
between yield and area.

80
81
Table 8. Decomposition of change in production variance
by region.
Description Eastern
India
Change in mean yield (%) 16.3
Change in mean area (%) 17.1
Change in yield variance (%) 31.4
Change in area variance (%) 5.5
Change in area-yield
covariance (%) 28.4
Interactions and residual (%) 1.3
Total change in variance (%) 60.4
A change in yield variance affects the
change in production variance directly (the third
component in Table 8) as well as through a
change in the covariance between yield and area
(the fifth component in Table 8). If the variance
of yield had not changed between the two time
periods, the increase in variance of output would
have been lower as the third term would be
reduced to zero. Furthermore, as covariance is a
function of yield variance, area variance, and
area-yield correlation, the covariance term
would also be affected even if the yield variance
did not change. Assuming that the change in
yield correlation and the change in area variance
were such that the change in area-yield
covariance became equal to zero,2 the increase in
production variance of eastern India would have
been 24% only. It is calculated as 0.604 x (1 -
.314-.284). This would have led to a reduction
in the CV of production3 by 25%. However, if
the change in area-yield covariance remained at
Northern Southern its current level, the reduction in CV of
India India
production would have been 20%. Thus, if the
23.0 37.8 variance of yield had not changed, the CV of
74.0 -206.1
-11.9 -46.6
production would have been lower relative to
-10.1 372.8 that in the first-period values by 20-25%. The
actual reduction in CV was 15% (Table 5). Thus,
28.7 52.5
-3.8 -110.3 the effect of an increase in the yield variance on
231 -9 the change in CV of production has been quite
small.
The decomposition of change in production
variance by state for eastern India shows that the
change in variance of production within the
states contributed to about one-half of the
increase in the total production variance of
eastern India (Table 9). The other half is
contributed by the changes in the interstate
production covariances. Thus, even if the
production variances within states had remained
unchanged, the production variance in eastern
India would have increased by as much as 30%
(i.e., 0.5 x 60%) as a result of the increased
production covariance across states.
What are the sources of changes in
covariances between yield and area across
states? The covariance may change as a result of
a change in correlation in area, correlation in
yield, or changes in area-yield correlation. It
may also change if the area or yield variances

Table 9. Decomposition of change in production variance by state.

Total variance All

Description Interstate eastern
Uttar Madhya Bihar Orissa West covariance India
Pradesh Pradesh Bengal

Change in mean yield (%) 35.9 -3.8 2.6 9.4 33.0 10.1 16.3
Change in mean area (%) 58.9 -77.7 -3.1 -1.5 15.5 11.9 17.1
Change in yield variance (%) -96.6 154.9 62.3 68.9 54.0 9.0 31.4
Change in area variance (%) 18.4 -0.5 7.7 -2.5 -5.2 3.3 5.5
Change in area-yield covariance (%) 25.7 -1.9 38.2 25.6 4.2 12.9 28.4
Interactions and residual (%) 57.7 26.4 -7.7 0.1 -1.3 3.2 1.4
Total contribution to the change in
variance of production in
eastern India (%) 3.1 -3.8 30.4 10.2 9.7 50.4 100

2 Calculated using the relationship

where is the correlation coefficient between yield and area, is the standard deviation of yield, is the standard
deviation of area, and A is the change from period 1 and subscript 1 denotes the value for period 1. The conditions above
imply that and This relationship is obtained from Hazell (1982).
3It can be shown that the proportionate change in CV is equal to where and are the proportionate
changes in variance and mean, respectively.

82
have changed. The examination of the
Correlation matrix showed that the percentage of
negative changes in area-yield correlation
(within and among states) was 44%. For yield
correlation across states, the percentage of
negative changes was 60%. The negative
changes in area correlation occurred in only 30%
of the cases. Overall, it appears that negative
changes in yield correlation may have helped
dampen the increase in production variance in
eastern India.
The change in production variance in Bihar
alone contributed to almost one-third of the
changes in production variance in eastern India.
This is the single largest source of change in
production variance in eastern India. Changes in
production variances in Orissa and West Bengal
have almost equal shares (10%) in the change in
production variance of eastern India.
The examination of variance decomposition
within Bihar, Orissa, and West Bengal indicates
that the change in the variance of yield accounts
for the major share of change in the within-state
production variance. For example, in Bihar and
Orissa, it accounts for 62% and 69% of the
change in production variances, respectively. If
the contribution of the change in within-state
covariance between yield and area is also taken
into account, this share increases to more than
90%. Uttar Pradesh and Madhya Pradesh are the
only states where the changes in yield variance
have helped reduce the change production
variance. The change in covariance has a
destabilizing effect in all states.
For each state, the increase in production
variance may be the result of increased variance
within districts and/or increased covariance
across districts. Variance decomposition analysis
using district-level data for each state indicates
that the change in yield variance is the major
source of changes in production variance in most
districts (the results of decomposition analysis
by district are available from the authors upon
request). Table 10 presents the percentages of
districts in a state recording negative changes in
4
Using the relationship in footnote 2, D cov (A,y) =
(A.y) was calculated using this relationship.
Table 10. Percentage of districts in each state recording
negative changes in correlations between the two time
periods.
State Yield Area Area and yield
correlation correlation correlation
Uttar Pradesh 81 69 49
Madhya Pradesh 15 53 49
Bihar 13 23 24
Orissa 42 41 28
West Bengal 56 61 48
yield correlation, area correlation, and area-yield
correlation between the two periods. The effect
is more pronounced in eastem Uttar Pradesh
where 81% of the changes in yield correlation
were negative. In contrast, Bihar had negative
changes in yield correlation among 13% of
districts only. Thus, relative to Bihar, district-
level rice yields in eastern Uttar Pradesh have
shown a greater degree of compensatory
changes resulting in increased stability in rice
production of the state. The patterns are similar
for changes in area correlation and area-yield
correlation also. Overall, West Bengal and
eastern Uttar Pradesh are the two states where
agricultural growth is also characterized by
changes in correlation that have a dampening
effect on production instability. On the other
hand, in Bihar and Orissa, such changes in
correlation may have reinforced the underlying
trend toward increased instability of production.
In Bihar, almost all of the increase in
production variance is due to the increase in
yield variance and the increase in area-yield
covariance. Thus, if these two components had
not changed, the production variance of Bihar
would not have increased much. Even if we
assume that the yield variance of Bihar had
remained constant with the area variance and the
area-yield correlation taking their respective
values in the second period, the production
variance of Bihar would have increased" by only
58% as opposed to the actual increase of 278%.
Thus, the increase in yield variance seems to be
the major source of instability in rice production
in Bihar.
when = 0. The new value of D CoV
83
 The variance decomposition analysis by
agroclimatic zone indicated that the change in
yield variance is the major source of change in
production variance within each zone. Changes
in the yield variance had stabilizing effects only
in the Northwest Alluvium, Eastern Plains, and
Eastern Highlands. Of the seven main zones, the
Northwest Alluvium, Northeast Alluvium,
Lower Gangetic Plains, and Eastem Coastal
Plains accounted for almost all the changes in
the production variance of eastern India. The
Northeast Alluvium zone had the highest share
(46%) of the increase in production variance in
eastern India. About half of this share was due to
the change in production variance within the
zone.
Reasons for changes in production
stability
Several factors determine variability in rice
production and patterns of change over time.
These relate to the characteristics of production
systems and the nature of changes occurring in
these systems. Such changes include expansion
of irrigation, increased adoption of modern
varieties and crop management practices,
changes in the variability of rainfall, changes in
the variability of price and production responses
to price changes, and shifts in rice-growing
environments. The effects of some of these
changes on the variability of production and
yield of rice in eastern India are examined
below.
Nature of irrigation
The nature and extent of irrigation are important
determinants of production variability (Pandey
1989). Good control of field hydrology (through
both irrigation and drainage) has been an
important factor in stabilizing production in
irrigated areas such as Punjab. This is also why
yield instability tends to be lower for summer
rice than for rainy-season rice-theformer is
grown in fields with an adequate and assured
water supply. Area variability also tends to be
lower when the water supply is assured. Both
these factors reduce overall production
instability.
84
Under irrigated conditions where irrigation
is not assured, production variability can
actually be higher than in rainfed conditions.
This is due mainly to the possibility of an
increase in area variability. When irrigation is
based on run-of-the-river schemes, small tanks,
and other local storage systems in which the
water supply is highly covariate with the local
rainfall, area instability tends to be higher than
when the water supply is based on schemes
backed up by large dams or an assured supply of
groundwater. With a less assured supply of water
at planting time, farmers adjust the area up or
down, depending on the water supply. This
results in a considerable fluctuation in area and
is the main reason for the high area variability in
tank-irrigated areas of southern India relative to
that in Punjab where irrigation is based on an
assured supply of groundwater.
For eastern India, rice is irrigated from both
assured and less assured sources of irrigation.
The recent expansion of tubewell irrigation
(Ballabh and Pandey 1999) in the Gangetic
Plains has been a major stabilizing force in rice
production, especially in eastern Uttar Pradesh
and West Bengal. In West Bengal, the gross
cropped area irrigated increased by 122%
between 1984 and 1996. The coefficient of
variation of production declined drastically in
these two states as a result. The stabilizing effect
has been so strong that even the variance of
yield declined in some districts of these states.
Variability of rainfall
Changes in the variability of rainfall between the
two time periods may also result in changes in
production variability, even if sensitivity of
output with respect to rainfall is constant. This
could be part of the explanation for the observed
differences in changes in production variability
across states. Rainfall variability as measured by
the CV of rainfall for the two time periods
analyzed increased in the Northeast Alluvium
(Bihar Plains) but decreased in eastern Uttar
Pradesh and West Bengal. The changes in
production variability in these states mirror the
changes in rainfall variability. Thus, even
without any change in the long-term variability
 of rainfall, the analysis based on different time Table 11. Parameter estimates for regression of the 10-
year moving coefficient of variation of yield on the IO-year
segments may indicate differences in variability moving coefficient of variation of rainfall.
due to different stochastic patterns of rainfall.
State/zone Constant Moving CV of R2
Could the changes in production variability rainfalla
between the two periods be driven mainly by the
Eastern Uttar Pradesh -1.28 0.68 ** 0.84
cyclical effects of rainfall? To explore this (9.19)
possibility, the CV of yield was regressed on the Eastern Madhya Pradesh 1.06 0.81 ** 0.53
(4.38)
CV of rainfall. Since there are only two Bihar Plateau -10.70 1.40 * 0.32
estimates of CV of yield for each state (i.e., one (2.95)
estimate for the first period and the other for the Bihar Plains 1.26 0.60 0.09
(1.61)
second period), the data for all states were Orissa 15.21 -0.08 0.01
pooled. No state-level fixed effects were (-0.30)
West Bengal 0.36 0.53 0.33
specified due to the limited degrees of freedom (2.96)**
available for hypothesis testing. The estimated *** , * = statistically significant at 1% and 5% level, respectively. Values
equation is as follows: in parentheses are 1-ratios.

CVy = -0.57 + 0.80 CVR - 0.9 D R2 = 0.5, n = 10.
(3.2) (-0.4)
where CVy, CVR, and D denote the CV of yield,
the CV of rainfall, and a dummy variable for the
second period (D = 1 for the second period),
respectively. The numbers in parentheses are the
t-ratios. The results indicate that the CV of
rainfall has a positive and significant effect on
the CV of yield. A 1 percentage point increase in
the CV of rainfall leads to a 0.8 percentage point
increase in the CV of yield in the eastern Indian
states. Another equation (in which the CV of
area was regressed on the CV of rainfall)
produced a statistically insignificant coefficient,
indicating that the observed area variability is
independent of rainfall variability.
The response of yield variability to-rainfall
variability estimated above is the average value
for both time periods and for all states of eastern
India. It is interesting to note that the variability
of rainfall explains half of the variation in the
CV of yield over time and across states. This is
despite the tremendous progress in the
expansion of irrigation in eastern India. The
variability of yield in eastern India thus appears
to be still determined mostly by the variability of
rainfall.
The sensitivity of yield to rainfall is
expected to be high in states with lower
proportions of area irrigated. So the CV of yield
is likely to be affected more by the CV of
rainfall in Orissa, Bihar, and eastern Madhya
Pradesh than in eastern Uttar Pradesh and West
Bengal. To examine this possibility, a 10-year
moving CV of yield of each state was regressed
on the corresponding IO-year moving CV of
rainfall. The results (Table 11) indicate that the
CV of yield is positively influenced by the CV
of rainfall for West Bengal, eastern Uttar
Pradesh, eastern Madhya Pradesh, and the Bihar
Plateau.5 For Orissa and the Bihar Plains, the
relationship was statistically insignificant. The
size of the coefficient associated with the CV of
rainfall is highest for Bihar plateau and lowest
for West Bengal, supporting the hypothesis that
the effect of rainfall Variability is likely to be
greater in regions with higher proportions of
rainfed rice. The changes in rice production
systems of West Bengal and eastem Uttar
Pradesh have not only led to a rapid growth in
yield but also have reduced the effect of
fluctuations in rainfall on yield instability. This
finding also supports the earlier results of Sen
(1987).

Rainfall data for the Bihar Plateau and Bihar Plains were available. Hence, the relationships for these two zones were
5

estimated separately.

85
 Increased sensitivity of output to rainfall
The sensitivity of output to rainfall is a function
of the pattern of rainfall, crop characteristics,
field characteristics, and type of crop production
technology used. Fluctuations in rainfall affect
production variability through changes in both
area and yield. In rainfed areas, a delay in early-
season rainfall generally leads to a reduction in
area under rice. Farm monitoring studies from
eastern Uttar Pradesh have found that rice area
increases when rainfall during the planting
season is adequate, but the area is reduced
dramatically when the rains are insufficient or
late (Pandey et al 1998). Rainfall fluctuations
similarly determine yield instability.
Has rice production become more sensitive
to rainfall variations in recent years? Rao et al
(1988) have found some empirical evidence
supporting an increase in sensitivity of output to
rainfall in India. The exact cause for the increase
in sensitivity however, is somewhat difficult to
pinpoint. To the extent that the yield of modem
varieties is more responsive to rainfall than that
of traditional varieties, the spread of modem
varieties under rainfed conditions may lead to a
greater sensitivity of output to rainfall. This may
be a major factor contributing to increasing
production instability in states such as Bihar
where modem varieties have also spread in
rainfed areas. In eastern Uttar Pradesh and West
Bengal, this effect is unlikely to be strong due to
the expansion of irrigation.
Adoption of modern varieties
As mentioned in the introductory section, the
adoption of modern varieties and associated crop
management practices is often believed to affect
production variability. For eastem India, Pal et al
(2000) have reported that the CV of state-level
yield of rice is negatively correlated with the
quantity of fertilizer applied per hectare,
indicating that the use of fertilizer has a
stabilizing effect. If the quantity of fertilizer
used is considered as a proxy for the extent of
6
A limitation of this analysis is that it is based on yield rather than on net return. If the cost of production associated with
modem varieties is substantially higher than that of traditional varieties, the conclusions may not be valid.
86
adoption of modem varieties, these results
indicate that modem varieties have had a
stabilizing effect on rice yield.
Are modem varieties intrinsically more
stable or unstable than traditional varieties? This
question remains a topic of debate. Earlier
literature suggested that the yield of modem
varieties is likely to be more unstable than that
of traditional varieties (Mehra 1981). The early
modem varieties were susceptible to some pests
and diseases and did lead to a yield reduction in
some areas. Recent varieties are more tolerant of
these biotic stresses. Similarly, early modem
varieties performed better under favorable
conditions and did not do as well as traditional
varieties under unfavorable conditions.
However, more recent evidence indicates that,
while modem varieties may have a higher
variance, they mostly have a lower CV of yield
and are not riskier than traditional varieties
(Anderson et al 1989, Witcombe 1989). The
results of analysis of the moving CV of yield
presented earlier also support the view that yield
variability (measured by CV) has declined over
the years as modem varieties have become more
widespread in some parts of eastern India.
Further light on this issue can be shed by
using farm- and state-level data from eastern
India. Stochastic dominance analysis of yield
data collected from a panel of farmers during
1994-98 from eastem Uttar Pradesh shows that
modem varieties dominate traditional varieties
in the sense of first-degree stochastic dominance
(Anderson et al 1977). The cumulative
probability distribution functions of modem
varieties are mostly on the right-hand side of
those of traditional varieties, indicating that
modem varieties are less risky (Fig. 4). A similar
analysis using state-level data for the two
periods (1969-81 and 1981-94) also indicates
that rice yield has become less risky in the
second period relative to the first period in all
states6 (Fig. 5). Thus, the adoption of modem
varieties in eastern India could be considered to
have a stabilizing effect.
 Despite the modem varieties being less
“risky,” why are there such large interdistrict
differences in changes in yield variance between
the two time periods? The change in district-
level variance of yield in eastem India between
the two periods analyzed varied from -77% to
700%. This wide range reflects the differences in
agroclimatic conditions and the types of
technologies being used for growing rice in
these 71 districts of eastem India. Although the
change in yield variance was between -50% and
50% in 55% of the districts, almost 25% of the
districts experienced a change in production
variance of more than 100%.
Earlier, it was indicated that at least a part of
this difference is caused by the difference in
rainfall variability between the two time periods.
The districts also vary in the extent of rice area
irrigated, adoption of modem varieties, and use
of chemical fertilizers. While some districts have
experienced a rapid adoption of modem varieties
and fertilizers, rice technologies in other districts
have changed very little. Variables measuring
these technological and climatic differences
could be used to explain the interdistrict
variation in changes in production variability.
However, a major problem with such an
approach is the unavailability of accurate
district-level data on major variables such as
rainfall, extent of adoption of modem varieties,
level of fertilizer use, and extent of irrigation.
Rainfall data are available on the basis of
meteorological subdivisions, not districts. The
data on the adoption of modem varieties,
especially in rainfed areas, are subject to high
degrees of error as the estimates are not based on
sample surveys. The fertilizer-use data available
refer to the quantity of fertilizer sold, not the
quantity applied to rice. While the data on sales
may be a good proxy for fertilizer use at the
state level, such an equivalence tends to be less
accurate at the district level due to substantial
cross-border movements of fertilizer. Data on
area irrigated are similarly subject to large errors
due to the expansion of private irrigation, which
is mostly unreported. Even for publicly
sponsored large-scale irrigation projects, data
available refer to irrigation capacity created
rather than actual area irrigated.
87
 These data limitations thus constrain efforts
to correlate changes in production variability
across districts with climatic and technology
variables. A somewhat indirect approach is used
here to get around this data constraint. Districts
experiencing a rapid adoption of improved seeds
and fertilizers are likely to record a higher
growth rate in yield than those that have slower
rates of adoption of these inputs. Thus, the rate
of growth in yield could be used as a proxy for
the adoption of improved technologies. 7 A
negative relationship is observed between the
rate of growth in yield during the second period
and the percentage change in yield variance
between the two time periods (Fig. 6A). The low
explanatory power of the model indicates the
presence of many location-specific factors that
vary across districts. A model based on a single
variable encapsulating a variety of effects is
unlikely to be able to account adequately for
interdistrict differences, especially when such
differences are very small. On the other hand,
even such a simplified model may have a better
explanatory power when the differences
considered are large. Accordingly, a second
regression was run on a subset of districts for
which the increase in yield variance was more
than 100%. The results (Fig.6B) indicate a
highly significant negative correlation between
the percentage growth rate in yield and the
percentage change in yield variance. The
explanatory power of the model has also
improved substantially. This negative
relationship indicates that districts where yield
growth rates have been high due to rapid
technological change also experienced a
relatively smaller increase in yield instability. In
other words, technological changes that have
resulted in a strong growth in yield have also
dampened the tendency toward increased yield
variability in eastern India. The increase in yield
variance has been more in those districts that
experienced relatively slower growth in yield.
This result indicates that, contrary to
conventional wisdom, growth and stability can
move together.
Increased price elasticity of output
Output may vary from year to year as farmers
alter their input use, depending on the prices of
inputs and outputs. For a given degree of price
instability, output instability will increase with
an increase in the price elasticity of output.
Thus, a systematic pattern of change in price
elasticity over time may induce changes in
output instability.
One of the factors that determine the price
elasticity of the supply of rice is the share of
purchased inputs in the total cost. The theory of
production economics dictates that the price
elasticity of output increases with an increase in
the share of purchased inputs. The intuitive
reasoning is that a change in output price will
induce a compensatory change in purchased
variable inputs as farmers attempt to maximize
profits. When the share of purchased inputs is
greater, a given percentage change in the
quantity of such inputs would mean a greater
absolute change in output. Thus, the output
would appear to be fluctuating more when the
share of purchased variable inputs in the total
production cost is higher. Since the share of
purchased inputs such as fertilizers is generally
higher for modem varieties (Kshirsagar et al
1997). the supply elasticity of output can be
expected to increase with the expansion of area
under modem varieties. It is difficult to test this
hypothesis empirically, as estimates of supply
elasticity for different rice varieties grown under
similar conditions are not available.

7
The rate of yield growth as a proxy for the extent of adoption of modern technologies can be problematic if area expansion,
not yield growth, is the major source of output growth. Similarly, if average productivities across districts differ widely, the
growth rate in yield may be a poor proxy for the extent of adoption of modern technologies. A district with a high average
yield and ceiling level of adoption of modern technology may record a slower growth rate relative to districts with a low
average productivity where technology adoption has just commenced. For eastern India, the major source of growth in rice
output has been the increase in yield. Similarly, during the first period when the adoption of modem varieties and fertilizers
was limited in eastern India, interdistrict differences in yield were relatively small.

89
 An additional effect that will tend to
increase the price elasticity of rice is the trend
toward increasing crop diversification in eastern
India. This is evident in eastern Uttar Pradesh
where rice contributes only 33% to the gross
cropped area. When more cropping choices are
90
available, the price responsiveness of individual
crops increases as farmers allocate their
resources among alternative crops relatively
smoothly. The response to price changes occurs
mainly through adjustment in area planted. This
is probably why the instability of area under rice
has increased in eastern Uttar Pradesh in recent
years.
Variability of price
Price-induced fluctuations in output can be
expected to increase (decrease) if the instability
in price has increased (decreased). For eastern
India, the variability of output price may have
decreased over time as markets have become
more integrated and the domestic output of rice
has increased steadily over time. Similarly, input
markets are better integrated than they used to
be during the early phases of the Green
revolution. Any resulting reduction in the
variability of prices is thus likely to have a
dampening effect on production instability.
Although farmers’ supply response may be
more closely correlated with farm-gate prices,
we have examined the variability of the
procurement price for rice as uninterrupted time-
series data on procurement prices (minimum
price guaranteed by the government) were
available from published sources. Furthermore,
the farm-gate price and procurement price tend
to he highly correlated. Although the 10-year
moving CV has increased in recent periods,
8Real price obtained by deflating the nominal procurement price of rice by the price index of all commodities as reported in
CMIE (1995).
there is some evidence that the variability of the
real procurement price8 had an overall negative
trend over the period 1970-94 (Fig. 7).
Shift in rice areas
The shift in rice production from marginal to
favorable areas can be expected to decrease
instability. As the agricultural systems in eastern
India have become more diversified, there is
some evidence that other crops such as pulses
are replacing for rice in marginal areas. For
example, in Orissa and Bihar, pulses and
oilseeds have replaced autumn rice, which is
mostly grown in marginal areas (Naik et al
2000). With further diversification of
agriculture, rice production can be expected to
shift from more marginal to less marginal and
favorable areas, resulting in greater yield
stability.
Increased production of summer (boro)
rice
Eastern India has experienced a rapid expansion
of boro rice in recent years. This has occurred
91
mostly in West Bengal but some expansion of
boro rice has also occurred in Bihar and Assam.
Since boro rice is grown under climatic
conditions more stable than those under which
kharif rice is cultivated, an increase in area
under boro rice can be expected to have a
stabilizing effect on rice production. The data
from West Bengal indicate that the stabilizing
effect of boro rice comes mainly from the
reduced instability of rice area. As boro rice is
planted using a relatively assured supply of
water, the instability in boro rice area tends to be
considerably lower than that of rainy-season
(kharif) rice. The area instability in four districts
of West Bengal (Howrah, Midnapore, Nadia,
and 24-Parganas), which experienced a rapid
expansion of boro cultivation, declined
dramatically between the two time periods. The
area under boro rice in these districts increased
by 50% between 1986 and 1994. The decline in
the CV of area of these districts was 15-55%.
Although yield stabilization was also observed
in some cases, the effect was not as strong as for
area stabilization.
Increased share of output from states
with greater production stability
Eastern Uttar Pradesh and West Bengal are the
two major states in eastern India that have
shown an increase in stability in rice production.
An increase in the contribution of these states to
rice output in eastern India would have a
stabilizing effect. The average contribution of
production from eastern Uttar Pradesh to eastern
Indian output increased from 10% to 15%
between the two time periods. Similarly, the
average share of production from West Bengal
increased from 30% to 33%. On the other hand,
the average share of Bihar, where production
instability is higher, decreased from 24% to
18%. Such shifts in relative contribution can be
expected to have a stabilizing effect on rice
production.
Rising importance of yield growth as a
source of production growth
The importance of yield in determining the
production growth rate has increased in the
92
second period relative to the first period. During
the first period, yield growth contributed to 68%
of production growth in eastern India. During
the second period, the contribution of yield
growth increased to 86%. As yield tends to be a
relatively more unstable component than area, it
is believed that the increased importance of yield
growth may lead to greater instability of output
(Rao et al 1988).
How has the relative size of area and yield
variability changed between the two periods?
Yield instability can be expected to decline with
the expansion of irrigation. This will have a
stabilizing effect on output if area instability
does not increase. However, the instability of
area can increase with commercialization and
diversification of agriculture. When farmers
have more options in market-oriented diversified
systems, they are likely to switch between rice
and a nonrice crop more often, depending on
climatic conditions and expected relative prices
of alternative crops. Thus, area variability is
likely to become an important source of
variability as rice production systems in eastern
India become more diversified over time. In fact,
for eastern India as a whole, the ratio of the CV
of yield to the CV of area was 5.4 in the first
period. This ratio became 2.7 in the second
period, indicating that the instability of area has
become relatively more important between the
two time periods. However, even during the
second period, the CV of yield was at least twice
as high as the CV of area. As future growth in
rice production will arise mostly from an
increase in yield, production instability is likely
to increase unless yield instability can be
reduced through improved technologies.
Production variability is likely to rise further if
this is accompanied by increased area variability.
Concluding remarks
The analysis presented in this paper indicates
that the CV of production and yield in eastem
India has declined over time. The decline has
been sharper in West Bengal and eastern Uttar
Pradesh where groundwater irrigation has
expanded rapidly. Even in the Bihar Plains and
the Coastal Plains of Orissa, where rice
production is characterized by high risk of
 flooding, the CV of yield has increased only
marginally.
Although the CV of yield has shown a
declining trend, the absolute variability in
production has increased in most states and
agroclimatic zones. The major sources of
increases in variance in eastern India are the
increase in within-state yield variance and area-
yield covariance as well as an increase in
interstate correlations. Judging by the effect on
production variance, eastern Indian states can be
divided into two categories. The expansion of
irrigation, the adoption of modern varieties, and
the growth in yield of rice are most prominent in
eastern Uttar Pradesh and West Bengal. These
factors have reduced not only the yield variance
in many districts of these states but also the
interdistrict correlation in yields. A reduction in
yield variance and an increase in mean yield
have thus led to a substantial reduction in the
CV of production in these states. On the other
hand, production variability has increased only
where modem varieties have spread in areas
with poorer hydrological control such as in the
Northeast Alluvium (Bihar Plains) and Eastern
Coastal Plains of Orissa. These two differing
patterns indicate that the observed changes in
production variability are the result of interplay
among several factors, not just of adoption of
modem varieties. Although modern varieties are
often considered to be riskier than traditional
varieties, the analysis based on both farm-level
and district-level data indicates that this is not
the case. At least a part of the change in the
variability of production was found to be due to
changes in the instability of rainfall. The
analysis showed that CV of yield closely tracks
the CV of rainfall. indicating that in spite of
some progress in the development of irrigation
facilities, rice production in eastern India still
depends largely on the vagaries of the monsoon.
Other factors that have affected variability are
the expansion of irrigation, shifts to summer
rice, increased production from more favorable
areas, reduced price variability, and shifts in rice
production to less marginal areas.
The results generally support the hypothesis
that yield growth and stability are not mutually
inconsistent goals. In fact, production stability
has increased only in those districts of eastern
India where yield growth has been very rapid.
The expansion of irrigation and the development
of varieties suitable to the environment of
eastern India are likely to be the causal factors
that have reduced instability and increased
growth simultaneously. Districts that failed to
increase the growth rate in yield for a variety of
reasons are the ones where production instability
has tended to increase. Thus, emphasis on
reducing yield instability in plant breeding
programs, even at the cost of reducing yield
growth, may be counterproductive. Plant
breeders and others involved in technology
development may be more successful in
increasing and stabilizing rice output by
focusing on strategies to increase the average
yield. Of course, adequate policy support for
irrigation, credit, and marketing of inputs and
outputs plays a critical role in realizing the
potential benefits of improved varieties.
References
Anderson JR, Hazel1 PB. 1989. Variability in
grain yields: implications for agricultural
research and policy in developing countries.
Baltimore, Md (USA): The Johns Hopkins
University Press.
Anderson JR, Findlay CJ. Wan GH. 1989. Are
modern cultivars more risky? A question of
stochastic efficiency. In: Anderson JR,
Hazell PB, editors. Variability in grain
yields: implications for agricultural research
and policy in developing countries.
Baltimore, Md (USA): The Johns Hopkins
University Press.
Anderson JR, Dillon JL, Hardaker JB. 1977.
Agricultural decision analysis. Ames, Iowa
(USA): Iowa State University Press.
Ballabh V, Pandey S. 1999. Transitions in rice
production systems in eastern India:
evidences from two village in Uttar Pradesh.
Econ. Pol. Wkly. 34 (13): All-A16.
Barker R, Gabler EC, Winkelmann D. 1981.
Long-term consequences of technological
change on crop yield stability: the case for
cereal grain. In: Valdes A, editor. Food
security for developing countries. Boulder,
Colorado (USA): Westview Press.
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Bindlish VL. 1988. An analysis of rice yield
variability in India based on district-level
data: estimate of the separate variances for
the high-yielding and traditional varieties
and the role of expectations in measuring
variability. PhD thesis, Cornell University.
Byerlee D. 1995. Technology transfer systems
for improved crop management: lessons for
the future. In: Anderson JR, editor.
Agricultural technology: policy issues for
the international community. Cambridge
(UK): Cambridge University Press.
CMIE. 1995. India’s agricultural sector: a
compendium of statistics. Centre for
Monitoring Indian Economy, Economic
Intelligence Service, Bombay, India.
DES (Directorate of Economics and Statistics).
1999. Agricultural statistics at a glance.
Directorate of Economics and Statistics,
Department of Agriculture and Cooperation,
Ministry of Agriculture, New Delhi, India.
FAI (Fertilizer Association of India). 1998.
Fertilizer statistics 1997-98. Fertilizer
Association of India, New Delhi, India.
Griffin K. 1988. Alternative strategies for
economic development. Organization for
Economic Cooperation and Development,
Pans.
Hazell PB. 1982. Instability in Indian foodgrain
production. International Food Policy
Research Institute, Washington, D.C.
Hazell PB. 1984. Sources of increased instability
in Indian and U.S. cereal production. Am. J.
Agric. Econ. 66(3):302-311.
Kshirsagar KG, Pandey S, Bellon M. 1997.
Farmer perceptions, varietal characteristics
and technology adoption: the case of rainfed
rice village in eastern India. Social Sciences
Division, Internationsl Rice Research
Institute, Los Baños, Philippines.
Mehra S. 1981. Instability in Indian agriculture
in the context of the new technology.
Washington, D.C. (USA): International Food
Policy Research Institute.
Naylor R, Falcon W, Zavaleta E. 1997.
Variability and growth in grain yields, 1950-
94. Popul. Dev. Rev. 23(1):41-58.
Naik D, Pandey S, Behura D, Villano RA. 2000.
Risk and rice production in Orissa, eastern
India. In: Pandey S, Barah BC, Villano RA,
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Pal S, editors. Risk analysis and
management in rainfed rice systems. Los
Baños (Philippines): International Rice
Research Institute.
Pal S, Pandey S, Abedullah. 2000. Growth and
variability in agriculture revisited: district-
level evidence of rice production in eastem
India. (this volume)
Pandey S. 1989. Irrigation and crop yield
variability: a review. In: Anderson JR,
Hazell PBR, editors. Variability in grain
yield: implications for agricultural research
and policy in developing countries.
Baltimore, Md (USA): The Johns Hopkins
University Press.
Pandey S, Singh HN, Villano RA. 2000. Rainfed
rice and risk coping strategies: some micro-
economic evidence from eastern Uttar
Pradesh. (this volume)
Planning Commission. 1989. Agro-climatic
regional planning: an overview. New Delhi,
India.
Rao CHH. 1968. Fluctuations in agricultural
growth: an analysis of unstable increase in
productivity. Econ. Pol. Wkly. 3237-94.
Rao CHH, Ray SK, Subbarao K. 1988. Unstable
agriculture and droughts: implications for
policy. Institute of Economic Growth, New
Delhi, India.
Sen SR. 1967. Growth and instability in Indian
agriculture. Agric. Situation India 2(10):827-
839.
Sen SR. 1987. Growth and instability in
agriculture. Keynote address at the National
Symposium on Growth and Instability in
Agriculture organized by the Indian
Agricultural Statistics Research Institute,
New Delhi, India.
Singh AJ, Byerlee D. 1990. Relative variability
in wheat yields across countries and over
time. J. Agric. Econ. 41 :21-32.
Walker TS. 1989. High-yielding varieties and
variability in sorghum and pearl millet
production in India. In: Anderson JR, Hazell
PBR. editors. Variability in grain yields:
implications for agricultural research and
policy in developing countries. Baltimore,
Md (USA): The John Hopkins University
Press.
 Witcombe JR. 1989. Variability in the yield of
pearl millet varieties and hybrids in India
and Pakistan. In: Anderson JR, Hazell PBR,
editors. Variability in grain yields:
implications for agricultural research and
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Md. (USA): Johns Hopkins University
Press. p 207-220.

Appendix 1. Components of change in variance of production.

Source of change Components of change

Description Symbola

Change in mean yield

Change in mean area

Change in yield variance

Change in area variance

Interaction between changes in mean yield

and mean area

Change in area-yield covariance

Interaction between changes in mean area

and yield covariance

Interaction between changes in mean yield

and area variance

Interaction between changes in mean area

and mean yield and changes in
area-yield covariance

Change in residual

aA = area sown, y = yield, V = variance. Source: Hazell (1982).

95
Appendix 2. Districts included in the study by state. Notes
Eastern Uttar Pradesh Saharsa
Allahabad Santhal Pargana Authors’ addresses: S. Pandey, International
Azamgarh Saran
Bahraich Sahabad Rice Research Institute, MCPO Box 3127,
Ballia Singhbhum Makati City, Philippines; S. Pal, National
Basti
Deoria Orissa
Center for Agricultural Economics and
Faizabad Balasore Policy Research, New Delhi, India.
Ghazipur Bolangir
Acknowledgment: The authors acknowledge
Gonda Cuttack
Gorakhpur Dhenkanal assistance from Abedullah and R.A. Villano.
Jaunpur Ganjam Citation: Pandey S, Barah BC, Villano RA, Pal
Mirzapur Kalahandi
Pratapgarh Keonjhar S. 2000. Risk analysis and management in
Sultanpur Koraput rainfed rice systems. Limited Proceedings of
Varanasi Mayurbhanj
Phulbani the NCAP/IRRI Workshop on Risk Analysis
Eastern Madhya Pradesh Puri and Management in Rainfed Rice Systems,
Balaghat Sambalpur
Bastar Sundergarh
21-23 September 1998, National Centre for
Bilaspur Agricultural Economics and Policy
Durg West Bengal
Research, New Delhi, India. Los Baños
Jabalpur 24-Parganas
Mandla Bankura (Philippines): International Rice Research
Raigarh Birbhum Institute.
Raipur Burdwan
Seoni Cooch-Behar
Shahdol Dajeeling
Surguja Hooghly
Howarh
Bihar Jalpaiguri
Bhagalpur Malda
Champaran Midnapore
Darbhanga Murshidabad
Dhanbad Nadia
Gaya Purulia
Hazaribagh West Dinajpur
Monghyr
Muzaffarpur
Palamau
Patna
Purnea
Ranchi

96
Growth and variability in agriculture revisited:
district-level evidence of rice production in eastern
India
S. Pal, S. Pandey, and Abedullah

This study attempts to explain the nature of growth and variability of yield and production of
rice in eastern India. A district-level analysis covering diverse agroclimatic conditions for the
period 1969-94 is used to investigate the changing pattern of production variability and its
primary causes. The results show that the growth in yield of rice in eastern India accelerated
in the early 1980s. Yield growth mainly contributes to growth in rice production in the eastern
region. Almost 60% of rice area has shown a higher growth with a greater degree of stability
in rice yield. Yield variability declined in areas where the adoption of high-yielding varieties
and the use of NPK fertilizer has occurred. Based on an empirical analysis, alternative
policies to help reduce risk in rice production in eastern India are suggested.

One of the significant changes that has occurred
in Indian agriculture during the last decade or so
is the diversification of the regional production
base. Several new growth areas have emerged,
contributing to the growth of national food-grain
production. It is believed that the performance of
agriculture in these new growth areas would be
crucial to national food security in the years to
come. However, several questions relating to the
nature of agricultural growth have arisen. How
is the growth pattern different from that
observed in the “Green Revolution areas?” Is
growth widespread in the region or concentrated
in a few pockets? Is growth accompanied by
increased production variability? The issue of
production Variability is important because
increased variability was considered to be an
inevitable consequence of production growth
(Hazell 1982). In particular, rainfed agriculture
was found to be more unstable than irrigated
agriculture (Dhawan 1987, Rao et a1 1988, Pal
and Sirohi 1989, Singh and Byerlee 1990). Since
the new areas of agricultural growth are
predominantly rainfed, it would be interesting to
test the hypothesis of a positive association
between growth and variability. A district-level
analysis covering diverse agroclimatic
conditions can provide more insights into the
changing pattern of production variability, its
primary causes, and management strategies.
Keeping this in view, we studied rice production
in eastern India because this area has shown
exceptional dynamism and growth in food-grain
production. This paper first outlines the
analytical approach used to measure variability,
followed by a discussion of the regional and
temporal patterns of growth and variability in
rice production in eastern India. The subsequent
section deals with determinants of rice yield
variability. Finally, the paper discusses policy
options to reduce production variability and
mitigate its impact.
Measuring variability
Several measures of variability or instability are
used in the literature. These measures have their
own merits and demerits (Cuddy and Della Valle
1978). Our choice of measure is decided by
three factors: (1) consideration of trend in time-
series data, (2) amenability to apply the test of
significance for change over time, and (3) ease
with which the measure can be applied and
explained. All these criteria are met by using the
square root of the mean squared error of the
semilog trend function, a relative measure of

97
variability that estimates the average percentage
deviation from the trend and eliminates much of
the scale effect often encountered in time-series
data (Naylor et al 1997). Another advantage of
this measure is that it can be directly computed
and related to growth rate.
The analysis is done for the period 1969-
94, which was divided into two equal
1
subperiods, 1969-81 (period I) and 1982-94
(period II), to study temporal changes. Period II
corresponds to the period of comparatively
higher growth in yield and production of rice in
eastern India2 (Fig. 1). Growth and variability in
area, production, and yield of rice are analyzed
for both periods in all districts of the eastern
states—eastern part of Uttar Pradesh and
Madhya Pradesh, Bihar, Orissa, and West
Bengal. Appendix I lists the districts in each
state covered in the study. The northeast states
could not be included in the analysis because of
a paucity of data. The study examines regional
patterns of variability across administrative
regions (states and districts) as well as across
agroclimatic regions. The former are important
for policy implementation considerations,
whereas the latter are essential for explaining
differences in variability.

1
In this paper, all years refer to agricultural years, e.g., 1969 refers to 1969-70, 1970 refers to 1970-71, and so on.
All rice data are converted to rough rice.
2
The second period begins with a year (1982-83) of shortfall in rice yield and production: therefore, one may expect
the results to be sensitive to selection of time period. This sensitivity was examined but the change in cutoff point for
the second time period did not alter the trend in both periods significantly.

98
Growth and variability in rice area under rice, giving a very high growth rate.
production: regional and temporal But, at a later stage, with no possibility of area
patterns expansion and yield improvement using
available varieties, a sharp decrease in growth
Aggregate analysis rate was noted. In fact, rice yield has now
become almost stagnant. Several factors
Growth pattern. Rice production in India stimulated yield growth in the 1970s in
increased from 63 million t during the triennium favorable areas: homogeneity of the production
ending in 1971 to 118 million t during the environment; increasing investment (both public
triennium ending in 1994. Most of the increased and private) in agriculture, particularly in
production during the 1970s came from the irrigation, research, and extension; government
northern region comprising the states of Punjab programs for irrigated areas to increase food
and Haryana (Table 1). During 1969-81, the production; and price policy. These regions are
northern region registered an impressive growth now encountering second-generation problems
of 14% (annual compound growth rate) in relating to sustainability of the production
production, contributed by growth in yield as system. Technological intervention is essential to
well as in area. The growth rate slowed address these problems and to sustain yield
considerably, however, during 1982-94 (Table growth (Chand 1999).
2). In the early phase of the Green Revolution, Eastern India, in contrast to the northern
the large increase in rice yield resulted in more region, did not show any significant growth in
rice production and yield during the first period.
But, in the second period, the growth rate was
Table 1. Area (000 ha), yield (t ha-1), and production (000 t) about 4%, nearly doubling the yield and
of rice in eastern India, 1969-94.a production and contributing nearly half of the
Statelregion 1969-71 1979-81 1992-94 increased production in the country. West Bengal
was the only state in the region that had a
Eastern Uttar Pradesh
Area 2.465 2.790 2.905
statistically significant growth rate in yield and
Yield 1.08 1.15 2.63 production in both periods (Table 2). In the
Production 2,686 3,233 7,627
second period, eastern Uttar Pradesh, eastern
Eastern Madhya Pradesh
Area 3,760 4.051 4,539 Madhya Pradesh, and Orissa also showed
Yield 1.27 1.09 1.79 significant growth. In Bihar, growth was
Production 4,780 4,425 8,142
Bihar statistically insignificant in each period, but,
Area 5.287 5.352 4.498 taking both periods together (1969-94), a
Yield 1.22 1.26 1.67
Production 6,424 6,720 7,574 significant growth of 1.4% in yield and 1 % in
Orissa production was noticed. In spite of appreciable
Area 4.396 4,156 4,485
Yield 1.28 1.35 2.07
yield growth in the eastern region, the current
Production 5.633 5,615 9.271 level of rice yield (2.3 t ha-1) is about half of that
West Bengal
Area 4,919 5,087 5,781
obtained in the irrigated areas of the northern
Yield 1.60 1.89 3.13 region (Table 1).
Production 7.863 9,630 18,077
Part of the regional differences in growth
Eastern region
Area 20,827 21,436 22,208 rates of yield could be attributed to the extreme
Yield 1.31 1.38 2.28 diversity of rice production environments in
Production 27,341 29,656 50,733
Northern region eastern India. Erratic weather, coupled with
Area 585 1,499 2,489 varying soil types, soil depth, rainfall, and
'field 2.69 4.03 4.95
Production 1,571 6,039 12,320 topography, results in various kinds of abiotic
All India and biotic stresses. However, an appreciable
Area 37,439 40,091 42,376
Yield 1.69 4.03 4.95
growth in rice production in West Bengal and
Production 63,159 75,358 11,8676 Uttar Pradesh can be attributed to the successful
aNumbers are 3-year averages. State and regional figures are total of
implementation of land reform and
the selected districts. encouragement of private investment in

99
Table 2. Growth and variability in rice production in eastern India.

Growth rate (%)a Annual percentage deviation from trendb

Statelregion
1969-94 1969-81 1982-94 F ratioc 1969-94 1969-81 1982-94 F ratiod

Eastern Uttar Pradesh

Area 1.08*** 1.41*** 0.51 (-) 1.40 5.52 4.12 6.47 2.46*
Yield 4.40*** 1.28 4.92*** 3.22* 19.25 23.76 7.82 (-)9.22***
Production 5.48*** 2.70 5.43*** 2.07 20.87 25.19 12.87 (-)3.83**
Eastewrn Madhya Pradesh
Area 0.80*** 0.75*** 0.99*** 5.65** 0.95 0.66 0.94 2.25*
Yield 1.99*** -0.86 3.08*** 2.51 20.03 23.87 12.01 (-)3.95**
Production 2.79*** -0.11 4.07*** 2.58* 20.49 24.22 12.48 (-)3.77**
Bihar
Area -0.33* 0.48 -0.57 (-)1.69 6.59 4.45 7.90 3.14**
Yield 1.37*** 0.63 1.95 0.34 15.01 11.64 18.46 2.51*
Production 1.05** 1.11 1.38 0.03 18.77 12.88 24.51 3.62**
Orissa
Area -0.05 -0.57** 0.85** 6.76*** 4.71 3.60 4.12 1.31
Yield 2.24*** 0.67 3.73*** 2.25 14.43 13.56 13.91 1.05
Production 2.20*** 0.10 4.59*** 3.53** 17.78 14.95 17.28 1.34
West Bengal
Area 0.64*** 0.35 1.29*** 4.97** 3.60 3.48 2.71 (-)1.66
Yield 3.10*** 1.69*** 4.62*** 5.04** 10.16 7.80 9.68 1.54
Production 3.74*** 2.04** 5.91*** 6.09*** 12.73 9.84 11.43 1.35
Eastern region
Area 0.36*** 0.40** 0.63** 1.18 2.63 1.89 3.17 2.78*
Yield 2.61*** 0.82 3.86*** 4.46** 11.25 10.65 9.11 (-)1.36
Production 2.97*** 1.22 4.49*** 3.44** 13.12 12.04 11.87 (-)1.03
Northern region
Area 6.62*** 9.60*** 3.50*** (-)42.34*** 13.33 7.57 4.75 (-)2.54*
Yield 2.54*** 4.87*** 0.83** (-)13.07*** 10.84 9.59 5.03 (-)3.64**
Production 9.16*** 14.47*** 4.33*** (-)48.39*** 21.91 11.51 7.83 (-)2.16
All India
Area 0.56*** 0.82*** 0.63*** 1.79 2.24 1.65 2.59 2.47*
Yield 2.46*** 1.53** 3.08*** 0.96 6.84 7.68 4.75 (-)2.62*
Production 2.96*** 2.33*** 3.73*** 0.21 8.17 8.95 7.01 (-)1.63

a,bCoefficient and square root of the mean

squared error, respectively, of the semilog regression. cChow test F ratio. dRatio of the mean squared
error.***,**,*= significant at 1%. 5%, and 10% level. respectively.

agriculture, particularly in tubewell irrigation wider adoption of high-yielding varieties

and land improvement (Rao 1994). Also,
infrastructure facilities were comparatively well
developed in West Bengal and Uttar Pradesh
(Bhatia 1999), placing these states ahead in yield
growth.
Changes in variability. Table 2 also shows
the magnitude of Variability or instability
measured as annual percentage deviation from
the trend. Variability in rice yield and production
was higher in the eastern region than in the
northem region or in the country as a whole. The
eastern region did not show any significant
change in yield variability between the two time
periods, whereas it decreased significantly in the
northern region. Area variability decreased in the
northern region and increased in the eastern
region. The lower and declining pattern of yield
variability in the northern region is under-
standable because of assured irrigation and
(HYVs) developed primarily for the irrigated
areas.
Among the eastern Indian states, variability
was higher in Bihar and lower in West Bengal.
In fact, yield variability in Bihar increased from
11.6% in the first period to 18.5% in the second
period, and the increase was statistically
significant at the 10% level. On the other hand, a
significant decline in the variability of yield and
production was observed in the eastem parts of
Uttar Pradesh and Madhya Pradesh. more so in
Uttar Pradesh where yield variability was
reduced to one-third of that in the first period.
District-level analysis
We have analyzed growth and variability in rice
production in 71 districts of eastern India,
covering almost the entire rice area in the region,

100
 or half the country's rice area. Tables 3 and 4
summarizes important patterns emerging from
the district analysis. Based on the level of rice
yield during the triennium ending in 1994-95,
the districts were classified into two groups: (1)
districts having a yield of 2.28 t ha-1 (average
rice yield in eastern India) or more and (2)
districts with rice yield less than 2.28 t ha-1.
These groups cover 45% and 55%, respectively,
of the total rice area in the eastern region during
the triennium ending in 1994-95. All the districts
are further grouped according to significance of
change in growth and variability in yield and
production. The Chow test and F test based on
the ratio of mean squared errors were applied to
test the significance of the change in growth rate
and annual percentage deviation, respectively,
between the two time periods.
Temporal changes. A large number of
districts with high yield have shown a significant
change in growth and/or variability in rice yield
and production between the two time periods
(Table 3). Most of these districts have either
shown a decrease in variability with no change
in growth rate of yield and production or an
increase in growth rate with no change in
variability. The districts in the former category
are mainly from Uttar Pradesh and occupy about
7% of the rice area in the eastern region during
the triennium ending in 1994-95, whereas the
latter group of districts belongs to West Bengal
and contributes about 16-18% of the total rice
area. Only three districts of Uttar Pradesh-
Gonda, Gorakhpur, and Sultanpur with only 3%
of the total rice area-registereda significant
increase in yield growth with a significant
decrease in its variability. In fact, most of the
districts of Uttar Pradesh have registered a sharp
and significant decline in yield variability (Fig.
2). In contrast, growth in yield as well as in
production was accompanied by an increase in
variability in Puri District of Orissa. The
districts showing no significant change in
growth as well as in variability of yield and
production occupy about 18% and 14% of the
total rice area. respectively. Most of the districts
in this category are from West Bengal, having a
fairly low degree of variability in both periods.
In the districts with low rice productivity,
three important changes were observed. The first
was the increase in growth rate with no change
in variability. The districts showing this trend in
rice yield contributed 6% to the total rice area,
whereas the area with similar changes in
production contributed 13%. Second, about 8%
of the total rice area, covering five districts from
Madhya Pradesh and one from Orissa, showed a
significant decline in variability of yield and
production with no significant change in growth
rate. Third, the districts with an increase in
variability but with no change in growth rate of
yield and production accounted for 6% and 10%,
respectively, of the total rice area. These districts
are mainly from Bihar and have not shown
significant growth in yield in either period.
It is important to note that about half the
total rice area did not show any significant
change in growth and variability of rice yield
between the two time periods, and that rice yield
in two-thirds of this area was less than 2.28 t ha-1.
If we further add the area with increased
Variability in yield, the share of these low-yield
districts in the total area increases to 40%. These
low-productivity areas are found in the alluvial
plains of Bihar and in the plateau and highland
areas of Bihar, Orissa, and Madhya Pradesh.
Regional pattern. Because of the changes in
the growth and variability of rice yield over
time, it would be worthwhile to examine how
rice yield behaved in terms of growth vis-á-vis
the actual level of variability. About 75% of the
total rice area had a significant growth in yield
during 1982-94 (Table 4). More than half of this
area or 41% of the total rice area, had low yield
variability (annual percentage deviation from the
trend in yield less than 15%). These higher
performing areas had rice yields of 2.28 t ha-1 or
more and are spread mainly in the alluvial plains
of West Bengal and Uttar Pradesh. About one-
third of the total rice area had significant growth
in yield with a moderate level of variability (15-
30%). Rice yield was stagnant and moderate to
highly unstable in 22% of the total rice area,
exclusively in low-productivity areas. In fact,
nearly 80% of the area with low rice
productivity had a moderate to high degree of
variability, versus one-fourth of the high-
productivity area showing moderate variability.
An examination of the position of various
districts under the columns of production and
101
Table 3. Changes in growth and variability in production and yield of rice in eastern India by districts.

Change in Change in variability (annual percentage deviation from trend)

growth rate
Production Yield

Decrease No change increase Decrease No change Increase

Districts with yields of 2.28 t ha-1 or higher

Increase Sultanpur (0.71) Raipur, Bankura, Burdwan. Puri (1.62) Gonda. Gorakhpur, Raipur, Bankura, Darjeeling, Puri (1.82)
Darjeeling, Midnapore, Sultanpur (3.0) Midnapore, Murshidabad.
Murshidabad, Purulia, Purulia, West Dinajpur (15.77)
West Dinajpur (18.41)

No change Allahabad, Azamgarh,
Faizabad, Ghazipur,
Jaunpur, Mitzapur.
Pratapgarh, Nadia,
Varanasi, Howrah (7.70)
Ballia. Gonda, Gorakhpur,
Sahabad, Sambalpur,
24-Paragana, Birbhum,
Hooghly, Malda (13.78)
Ganjam (1.47) Allahabad, Azamgarh,
Deoria, Faizabad,
Ghazipur, Jaunpur,
Mirzapur, Pratapgarh,
Varanasi (6.88)
Ballia, Sahabad, Ganjam,
Sambalpur, 24-Paragana,
Birbhum, Burdwan, Hooghly,
Howrah, Malda, Nadia
(17.48)

Decrease Deoria (1.06)

Districts with yields less than 2.28 t ha-1

Increase Basti, Bilaspur, Balasore. Basti (1.76) Bahraich, Bolangir, Keonjhar.

Bolangir, Dhenkanal, Cooch-Behar, Jalpaiguri (5.95)
Cooch-Behar, Jalpaiguri
(13.04)

No change Balaghat, Jabalpur,
Raigarh, Shahdol,
Surguja, Kalahandi
(7.71)
Durg, Mandla, Seoni, Bahraich. Bastar, Balaghat, Jabalpur, Bilaspur, Durg, Mandla, Bastar,
Bhagalpur, Dhanbad, Gaya, Champaran, Raigarh, Shahdol, Seoni, Bhagalpur, Darbhanga.
Hazaribagh, Palamau, Darbhanga, Monghyr, Surguja, Dhanbad, Champaran, Gaya, Monghyr,
Purnea, Ranchi, Saharsa, Muzaffarpur, Kalahandi (7.92) Hazaribagh, Palamau. Muzaffarpur
Santhal Paragana, Saran, Patna (9.56) Patna, Purnea, Ranchi, (6.05)
Singhbhum, Cuttack, Saharsa, Santhal Paragana,
Keonjhar. Koraput, Saran, Sighbhum, Balasore.
Mayurbhanj, Phulbani, Cuttack, Dhenkanal, Koraput,
Sundergarh (25.85) Mayurbhanj, Phulbani,
Sundergarh (33.34)

aNumbers in parentheses are rice area of the group as percentage of total rice area in eastern India during 1992-94. Changes in growth and variability are statistically significant at the 10% level. None of the

districts in the low-productivity group showed a significant decrease in the growth rate.
Table 4. Variability in production and yield of rice by districts, 1982-94.
Variabilitya Production
Significant growth
45% Deoria, Faizabad.
Varanasi, 24-Paragana,
Burdwan, Dajeeling.
Hooghly, Malda,
Midnapore, Nadia.
West Dinajpur (19.17)b
15-30% Allahabad, Azamgarh.
Ballia, Ghazipur,
Gorakhpur, Jaunpur,
Mirzapur, Pratapgarh,
Sultanpur, Raipur, Puri.
Sambalpur, Bankura,
Birbhum, Howrah,
Murshidabad, Purulia
(22.09)
>30% Ganjam (1.47)
45% Raigarh, Mayurbhanj,
Cooch-Behar,
Jalpaiguri (5.86)
15-30% Basti, Bastar, Bilaspur,
Durg, Mandla, Surguja,
Purnea, Saharsa,
Balasore, Bolangir.
Cuttack, Dhenkanal.
Kalahandi, Keonjhar,
Koraput. Sundergarh
(28.66)
>30% Bahraich, Jabalpur (1.58)
aAnnual percentage deviation from trend. Figures in parentheses are rice area of the group as percentage of total rice area in eastern India
b
during 1992-94.
yield in Table 4 gives some idea about the
relative contribution of area and yield to
production variability. By and large, variability
in rice production was influenced by yield
variability in both the low- and high-
productivity areas. However, production
variability in high-productivity districts was
higher than yield variability, indicating the
significant contribution of area variability and
covariate movements between yield and area.
Growth
Yield
No growth Significant growth No growth
Districts with yields of 2.28 t ha-1 or higher
Allahabad, Azamgarh.
Deoria, Faizabad, Ghazipur,
Gorakhpur, Jaunpur, Mirzapur,
Pratapgarh, Sultanpur. Varanasi.
Sambalpur. 24-Paragana,
Bankura, Birbhum, Burdwan,
Darjeeling, Hooghly, Malda,
Midnapore, Murshidabad,
Nadia, West Dinajpur (33.10)
Gonda, Sahabad (2.22) Ballia, Gonda, Raipur, Sahabad,
Ganjam, Puri. Howrah,
Purulia (11.86)
Districts with yields less than 2.28 t ha-1
Raigarh. Purnea, Champaran. Koraput
Mayurbhanj, Cooch-Behar, (3.63)
Jalpaiguri (7.92)
Balaghat, Shahdol, Basti, Bilaspur, Durg, Balaghat, Bastar, Mandla,
Bhagalpur, Champaran, Surguja, Balasore, Bolangir, Shahdol, Bhagalpur,
Ranchi, Santhal Cuttack, Dhenkanal, Dhanbad. Gaya, Patna,
Paragana, Saran, Kalahandi, Keonjhar. Ranchi. Saharsa, Santhal
Singhbhum (10.58) Sundergarh (20.26) Paragana, Saran,
Singhbhum, Phulbani
(16.81)
Seoni, Darbhanga, Bahraich (0.92) Jabalpur, Seoni,
Dhanbad, Gaya, Darbhanga, Hazaribagh,
Hazaribagh, Monghyr, Monghyr, Muzaffarpur,
Muzaffarpur, Palamau, Palamau (5.59)
Patna, Phulbani (8.35)
Year-to-year changes in rice area in high-
productivity regions could be due to farmers'
responses to changes in output prices, wages,
and rainfall. In favorable environments where
rice yields tend to be higher, farmers may shift
some area to more profitable and less labor-
intensive activities such as sugarcane growing.
The increase in correlation between area and
yield may also contribute significantly to the
increase in production variability. As a matter of
103
 Annual percentage deviation during 1982-94
Annual percentage deviation during 1969-81
Fig. 2. Significant changes in annual percentage deviation from the trend in yield.
fact, much of the increase in absolute variability
of crop production until the mid-1980s was
attributed to an increase in area-yield
covariability (Hazell 1982, Pal and Sirohi 1989).
A similar tendency is also observed for rice
production in eastern India. In Uttar Pradesh and
Bihar, rice areas having positive and significant
correlation between area and yield increased
sharply from more than 40% in the first period
to more than 80% in the second period (Table 5).
The correlation of rice yield between districts
also increased steeply in Bihar but decreased in
Uttar Pradesh and Madhya Pradesh. These
changes in covariability are understandable in
unirrigated, low-rainfall areas such as in Bihar,
where the impact of deficit rainfall on area and
yield is stronger on a large area. In Uttar
Pradesh, however, a decrease in the number of
districts with a positive yield correlation could
be due to the rapid expansion of irrigated area
and the decreasing sensitivity of rice yield to
rainfall. Expansion of irrigation is also expected
to reduce area-yield covariability, but it failed to
do so in Uttar Pradesh. This implies that other
factors, such as fanners’ response to output price
104
changes, induce area-yield covariability. In the
expectation of high prices, farmers allocate more
area to rice and use more inputs to increase
yield; the reverse holds true when the price is
expected to be low.
Determinants of rice yield variability
Crop yield and its variability are governed by
interactions between agroclimatic conditions and
technology. In a production environment where
farmers have more control on crop production
methods, production tends to be less sensitive to
weather. The availability of infrastructure such
as irrigation, inputs, and a technology delivery
system helps in the better management of
production processes and enables farmers to
employ adaptive and compensatory strategies to
reduce the likely adverse effect of weather on
crop output. Although quantification of all these
effects is rather difficult-partlybecause of the
complexity of the relationship and partly
because of nonavailability of data-wehave
analyzed the possible causes of yield variability
in this framework.
Table 5. Changes in area-yield and yield covariability.

Total Districts with positive and significant area-yield correlation Number of positive and significant
State number yield correlations between districts
of
districts % of rice area Total number
1969-81 1982-94 common in 1969-81 1982-94 of yield
both correlations
Number % of total Number of % of total periods
of districts rice area districts rice area

Eastern
Uttar
a

Pradesh 15 6 47.1 12 82.5 47.1 72 16 105

Eastern
Madhya
Pradesh 11 3 10.4 2 19.12 0 50 13 55

Bihar 17 9 42.8 15 90.0 36.0 22 95 136

Orissa b 13 6 53.1 8 65.7 36.0 41 49 78

West Bengal 15 13 69.3 7 49.6 49.6 42 30 105

Total 71 38 45.7 44 59.1 33.6 227 203 479

a
There were two negative and significant yield correlations in the second period. b There was one negative and significant area-yield correlation (in
Balasore District) in the first period.

Rice yield variability and agroclimatic
conditions
Rice is grown in extremely diverse agroclimatic
conditions in eastern India. The type and depth
of soil, climate, rainfall, topography, and
temperature vary widely. In some districts, all
rice production systems–irrigated, upland,
lowland, and deepwater–are present.
Nevertheless, an analysis of rice yield variability
by agroclimatic zones would be useful. The
districts covered in this study pertain to four
agroclimatic zone: Middle Gangetic Plains,
Lower Gangetic Plains, Eastern Plateau and
Hills, and East Coast Plains and Hills, as
identified by the Planning Commission (1989).
Table 6 gives the important agroclimatic
conditions of these zones and some of their
subzones, along with variability in rice yield.
One can easily see from this table that HYVs are
widely grown on unirrigated areas in all the
zones, and some of these areas, particularly
uplands with harsher environmental conditions,
have low and unstable rice yield.3 Such areas
appear to be less in the Lower Gangetic Plains
comprising the alluvial districts of West Bengal.
Therefore, rice yield is high and stable in this
zone. Also, in this zone boro or summer rice is
widely grown under irrigated conditions using
high doses of fertilizer. It is estimated that boro
rice has a yield advantage of about 1.5 t ha-1 over
irrigated rice in the wet season and about 2.28 t
ha-1 over the rainfed lowland rice. A similar yield
behavior was observed in eastern Uttar Pradesh,
which has a higher proportion of irrigated area,
mainly because of more private investments in
tubewell irrigation encouraged by land reform
and flood control measures. This has facilitated
the adoption of HYVs and use of modem inputs
(fertilizers), leading to an overall dynamism in
agriculture (Ballabh and Pandey 1999).
In the northeast alluvial subzone or the
Bihar plains of the Middle Gangetic Plains and
in coastal areas of Orissa, modem varieties are
grown on unirrigated areas with less inputs,
giving high yield variability. Rainfall (June to
September) in these two zones is comparatively
lower but more erratic (Table 7). The northeast

3
The percentages of irrigated and HW area are not strictly comparable, as the former does not refer to rice. In
the absence of reliable data on irrigated rice area, the percentage area irrigated is used as an approximation.

105
Table 6. Variability in rice yield by agroclimatic zones.

Agroclimatic Annual Rice NPK Gross Rice Yieldc Mean yield Annual %deviation
zone/ Soil typea Climatea rainfall areac usec irrigated area (t ha-1) (t ha-1) in yield
subzonea (mm)b (000 ha) (kg ha-1) areac,f under
(%) HYVsc 1969- 1982- 1969- 1982- F
(%) 81 94 81 94 ratio

Lower Red and Moist 1.175 4.892 88.3 37.6 42.8d 3.6 1.8 2.8 8.11 9.7 1.43
Gangetic yellow subhumid
Plains (or alluvial to dry
Gangetic (new and subhumid
West Bengal) deltaic)

Middle Gangetic Plains

Subzone I Alluvial Moist 901 2467 89.7 52.8 74.5e 2.6 1.2 2.2 22.9 8.5 (-)4.82***
Northwest (new), subhumid
alluvial (or calcareous to dry
East UP) subhumid

Subzone II Alluvial, Dry 992 3118 74.9 51.3 62.4d 1.8 1.4 1.7 12.9 18.4 2.03
Northeast tarai, subhumid
alluvial (or calcareous to moist
Plains of subhumid
Bihar)

Eastern Plateau and Hills

Subzone I Medium to Dry 1121 3641 36.6 30.3 68.7 2.1 1.3 1.8 22.2 11.7 (-)3.58**
Eastern deep black subhumid
Plains red and
(Plains of yellow
MP and
Orissa)

Subzone II Red sandy, Moist 1113 1802 16.0 15.0 55.2 1.5 1.1 1.4 22.5 10.2 (44.87***
Eastern red and subhumid
Highland (MP yellow to dry
and Orissa) subhumid

Subzone III Red sandy, Moist 1055 3141 27.1 12.0 30.1** 1.7 1.3 1.5 17.6 14.2 (-)1.07
Plateau red and subhumid
(north-central, yellow, red to dry
eastem loamy subhumid
plateau, and laterite
tribal areas
of Bihar, MP,
and Orissa)

East Coast Deltaic Moist 1084 1732 33.5 46.5 69.3 2.3 1.4 2.0 11.6 18.4 2.52'
Plains and alluvial, subhumid
Hills (North coastal
Orissa coast) alluvial,
laterite,
red loamy

aMP = Madhya Pradesh, UP = Uttar Pradesh. Source: Planning Commission (1989). bMean rainfall (June to Sep) during 1969-94. cTriennium

av ending 1994. Triennium average ending in 1987. e Av of 1988-89. fGross irrigated area as percentage of gross cropped area. ***,**,* =
significant at 1%, 5%, and 10% level, respectively.

subzone is also dryer and calcareous, and more
prone to waterlogging, floods, and droughts
(Ghosh 1991). The eastern plains covering the
Chhatisgarh plains of Madhya Pradesh and parts
of Orissa have comparatively higher average
yields and lower variability. This could be due to
deep soils capable of retaining soil moisture for
a long time. Rice yields are low and unstable in
the plateau region due to poor soil fertility and
poor moisture-holding capacity.
Sensitivity of rice yield to rainfall
As rainfall pattern is likely to be the dominant
cause of rice yield variability, it would be
worthwhile to analyze variation in rainfall and

106
Table 7. Frequency of deficit rainfall in eastern India.

Meteorological Mean rainfall CV (%) Direction Number of Number of years

subdivision (June to Sep, in mm) of rainfall of change years with with actual rainfall
in yield actual rainfall 80-90% of mean a
1969-8 1 1982-94 1969-81 1982-94 variability less than 80%
of mean a

Eastern Uttar 939 863 27.96 11.39 Decrease 5 (1972, 77, 79, 3 (1974, 86, 93)
Pradesh 87, 92)

Eastern Madhya 1,3 1,148 20.12 19.97 Decrease 3 (1974, 79.87) 6 (1973, 76, 81, 86,
Pradesh 89, 91)

Bihar 996 988 16.76 22.22 Increase 4 (1972, 82.86, 92) 5 (1975, 77, 79,
Plains 91, 94)

Bihar Plateau 1,070 1,018 18.32 19.39 Constant 4 (1979, 82, 86, 92) 3 (1972, 73, 93)

Orissa 1,060 1,107 11.70 16.36 Constant 2 (1974, 87) 1 (1979)

Gangetic 1,193 1.158 16.07 12.41 Decrease 2 (1976, 82) 4 (1973, 79, 89, 92)
West Bengal
a
Deficit rainfall years are given in parentheses.

quantify its effect on yield. We have examined
the effect of rainfall variation on rice yield in the
meteorological subdivisions 4 of eastern India.
Since the southwest monsoon is critical to rice
production, rainfall during June to September
was considered. It is unrealistic to expect a
significant change in rainfall pattern over a fairly
long period, but year-to-year changes in rainfall
and its distribution over the crop growth period
are common. These year-to-year fluctuations in
rainfall are measured around the average rainfall
for a meteorological subdivision. The number of
years with severe deficit in rainfall-actual
rainfall during June to September is less than
80% of the average during 1969-94-aremore
in Bihar and Uttar Pradesh (Table 7). The
distribution of deficit rainfall years over the
period was such that the coefficient of variation
(CV) of rainfall was lower during 1969-81 in the
plains of Bihar, whereas the CV was higher
during 1969-81 in Uttar Pradesh. These
differences in the CV of rainfall are similar to
those in yield variability in these two states. The
CV of rainfall is comparatively low in Gangetic
West Bengal and Orissa. In fact, Orissa has the
lowest number of deficit rainfall years (severe or
moderate) in eastern India; therefore, rice yield
should have been stable in this state. The
unexpected high yield variability in Orissa could
be attributed to differences in rainfall and
topography across the districts. As seen earlier,
Orissa forms part of the plateau, highland, and
coastal agroclimatic zones, and uplands with
shallow soils in these zones may experience
early or late-season moisture stress even in a
normal rainfall year.
To quantify the effect of rainfall on rice
yield, yield was regressed on time trend and
actual rainfall during the crop growth period
(June to September) by the ordinary least
squares (OLS) method. Here, rainfall is treated
just like any other input and excess rainfall is
expected to have a decreasing marginal product.
To capture this effect, rainfall variable of the
second degree (ie., rainfall2) was also included
in the model. The time trend variable was
included in the model to capture all other
temporal effects such as changes in inputs and
technology. The results in Table 8 are consistent
with our expectations. During the period 1969-
94, rainfall had a significant effect on rice yield
in all the meteorological subdivisions, except for

4
The meteorological subdivisions are defined based on rainfall and temperature such that there is uniform
evapotranspiration area. These subdivisions do not correspond exactly to the states or agroclimatic zones
defined by of Planning Commission. Therefore, yield and rainfall analyses from relevant districts were taken.

107
 Table 8. Response of rice yield to rainfall.

Time period/ Eastern Eastern Bihar Bihar Gangetic

Variablesa Uttar Pradesh Madhya Pradesh Plains Plateau Orissa West Bengal

1969-92
Mean yield (t ha-1) 1.65 1.36 1.53 1.30 1.58 2.30

Intercept -1.55** -1.88** -0.24 -1.12 -1.68 -4.05*

(3.2) (2.6) (0.2) (1.4) (1.7) (2.0)

Trend 0.072** 0.029** 0.027** 0.009* 0.022** 0.074**

(14.5) (7.0) (4.6) (2.2) (7.2) (12.8)

Rainfall (June to 0.005** 0.005** 0.003 0.003* 0.005* 0.009**

Sep, in mm) (4.4) (3.7) (1.3) (2.4) (2.5) (2.7)

Rainfall2 -2.12E-6** -1.52E-6** -13.8E-7 -15.0E-7* -14.24E-7* -3.45E-6**

(3.9) (3.2) (1.3) (2.0) (2.0) (2.6)

Adjusted R2 0.91** 0.75** 0.43** 0.41* 0.78** 0.89**

1969-81
Mean yield (t ha-1) 1.15 1.17 1.35 1.24 1.33 1.82

Intercept -1.04*** -2.02* 3.09** -1.47 -0.73 -0.29

(3.09) (2.15) (2.44) (1.48) (0.38) (0.68)

Trend 0.041*** 0.015 0.021 -0.007 0.013 0.04***

(5.05) (1.4) (1.73) (0.73) (1.34) (3.56)

Rainfall (June to 0.004*** 0.005** -0.004 0.005** 0.003 0.005

Sep, in mm) (5.65) (2.93) (1.35) (2.54) (0.78) (1.51)
Rainfall2 -1.82E-6*** -1.82E-6** 1.82E-6 -1.82E-6** -9.24E-7 -1.97E-6
(5.01) (2.43) (1.25) (2.25) (0.52) (1.52)

Adjusted R2 0.81*** 0.70*** 0.13 0.47** 0.40* 0.49**

1982-92
Mean yield (t ha-1) 2.15 1.56 1.69 1.34 1.80 2.80

intercept 0.1 8 -0.67 -2.95** -0.74 -2.73* -4.42

(0.06) (0.34) (2.34) (0.42) (1.89) (1.51)

Trend 0.12*** 0.043*** 0.033* 0.021 0.056*** 0.115***

(9.85) (3.20) (2.05) (1.15) (3.36) (7.71)

Rainfall (June to -0.002 0.002 0.008*** 0.003 0.006" 0.008

Sep, in mm) (0.24) (0.63) (3.07) (0.69) (2.32) (1.55)

Rainfall2 1.82E-6 -6.52E-7 -3.79E-6** -9.85E-7 -2.12E-6* -3.18E-6

(0.37) (0.53) (2.89) (0.50) (2.06) (1.44)

Adjusted R2 0.90*** 0.49** 0.52** 0.28 0.69*** 0.88***

Chow F (22. 18) 8.50*** 0.81 3.60***' 0.64 1.45 4.75***

valueb

Dependent variable: yield (t ha-1). Figures in parentheses are t values. ***, **, * = significant at 1%. 5%. and 10% level, respectively. bFor the test of
a

significance of the response function in the two periods (1969-81 and 1982-92).

the Bihar Plains. The first rainfall variable had
positive and significant effect on yield, whereas
the second variable had a negative and
significant coefficient. In the Bihar Plains, the
coefficients of rainfall variables had the
expected sign, but they were nonsignificant. An
estimation of the equation by time period reveals
that rainfall had a significant effect on rice yield
in Bihar and Orissa in the second period, but the
effect became nonsignificant in Uttar Pradesh,
Madhya Pradesh, and the Bihar Plateau. How-
ever, the change in responsiveness of yield to
rainfall was statistically significant in Uttar
Pradesh and the Bihar Plains, which is expected

108
in view of the change in the CV of rainfall in
both regions and the expansion of irrigation
during the second period in eastern Uttar
Pradesh.
To estimate the area's responsiveness to
rainfall, rice area was also regressed on time
trend and rainfall variables. However, the effect
was significant only in the Bihar Plains and West
Bengal (equations 1 and 2). The differences in
area response to rainfall require further analysis.
Bihar Plains
RAt = 1,004.14 - 2.067 T + 4.695** Rt-0.00203* R2t;
(1.06) (0.38) (2.39) (2.02)
Adjusted R2=0.35***
West Bengal
RAt= 124.75 +28.727***T+6.588***Rt-0.0027***R2t;
(0.09) (7.41) (2.95) (2.96)
Adjusted R2= 0.78*** (2)
where RAt is rice area in year t (in 000 ha) Rt is
rainfall in year t (in mm), and T is the time trend
variable. Numbers in parentheses are t values
and ***, **, and * indicate significance at the
1%, 5%, and 10% level, respectively.
attributes of technology adoption and farmers'
adjustment behavior. Irrigated area does not
indicate the reliability of irrigation water and the
statistics in area under HYVs tends to be less
reliable. The use of NPK not only captures these
effects but also shows how much control farmers
have on input use and crop management
practices. Second, NPK use also represents
indirectly the effect of infrastructure facilities
necessary for the delivery of farm inputs. Third,
NPK use data are more consistent than HYVs or
irrigated area. The only limitation of NPK use is
that it does not pertain to a rice crop, but to all
crops grown in the district. In the absence of
(1)
crop fertilizer-use data, this is an approximation.
One significant omission in this analysis is of
rainfall variability because the CV computed for
the meteorological subdivision level rainfall
does not capture interdistrict differences in
rainfall variability, making this variable
redundant. The dummy variables, however,
capture part of the rainfall effect.
The OLS estimates of the model are given in
Table 9. The coefficients of the zonal dummy
Table 9. Results of yield variability model. a

Yield variability model Dependent variable

Explanatory
variable Mean yield Annual percentage
Differences in rice yield variability across (t ha-1) deviation from trend in yield
districts are examined to identify factors
Constant 2.12*** 22.82*** 21.93*** 18.20**
contributing to these differences. The analysis (11.68) (15.32) (16.18) (5.98)
was done for the second time period as the
Mean NPK use 0.008*** -0.08*** -0.07*** -0.04
current level of variability is of greater practical (3.35)
(kg ha-1) (3.69) (2.99) (1.39)
significance. Annual percentage deviation in
yield from the trend was regressed on the level Dummy variables
West Bengal 0.52** -4.37* -2.96
of HYV adoption, irrigation, other infrastructure Gangetic Plains (3.18) (1.78) (1.10)
facilities, share of boro rice in total rice area, and
Bihar Plains -0.80*** 7.82*** 9.88***
dummy variables for agroclimatic zones to (4.81) (3.33) (3.53)
capture zone-specific effects. All coefficients in
Eastern Plains -0.44** 4.25
the full model were statistically insignificant, (2.23) (1.31)
possibly due to multicollinearity. Variables such
Eastern Plateau -0.67*** 3.54
as percentage of rice area under HYVs, gross
and Highlands (3.65) (1.16)
irrigated area as a percentage of gross cropped (combined)
area, per hectare use of NPK, etc., are highly
Eastern Coastal 0.06 4.04
correlated, indicating high complementarity Plains (0.22) (0.95)
among the uses of these inputs. When these
Adjusted R2 0.69*** 0.13*** 0.30*** 0.29***
variables were used one at a time, coefficient
estimates were negative and significant. We aEastern Uttar Pradesh is the benchmark region for dummy variables.

The Chow test F ratio for the equations in columns 3 and 4 was 9.2 at
opted for NPK use (kg ha") for three reasons. (2,66) degrees of freedom, which IS significant at the 1% level. ***, *
First, the use of NPK also represents the quality = significant at 1% and 10% significance level, respectively; n = 70.

109
 variables have to be seen with Uttar Pradesh as a
basis for which no dummy variable was used.
The model has reasonably explained the
interdistrict differences in annual percentage
deviation from the trend in rice yield during
1982-94. The dummy variable for Gangetic West
Bengal had a negative and statistically
significant coefficient, whereas the coefficient
was positive and statistically significant for the
plains of Bihar. This showed that in comparison
to Uttar Pradesh, yield variability is lower in
West Bengal and higher in the Bihar Plains. The
quantity of NPK had a negative and highly
significant coefficient, indicating that the
adoption of modem varieties and associated crop
management practices helped achieve higher and
more stable yield. When NPK use alone was
retained in the model, it explained 13% of the
variation in yield. However, the Chow test
indicated that both models were statistically
different, and therefore both dummy variables
captured a significant effect of yield variability.
In the final iteration, when all the zonal dummy
variables were included in the model, all effects
were captured by these dummy variables and
NPK use became nonsignificant.
Sensitivity of yield variability to selection
of time period
Sometimes, yield variability can be sensitive to
the selection of time period, particularly when
shortfall years are close together. The temporal
pattern of yield variability and its underlying
causes thus obtained could be misleading. We
have therefore tested this sensitivity by
computing a 5-year moving CV of rice yield and
examined the significance of the trend. Then, we
tested the sensitivity of annual percentage
deviation from the trend in yield by changing the
subperiods. In particular, the test shows how
sensitive the results are to changes in cutoff year
for the second period.
The moving CV, like the moving average,
was computed around the mean for successive 5-
year periods by including one year and
excluding the first year. For example, the first
moving CV was computed for 1969-73 and is
referred to as 1973. In the next, the CV was
computed for 1970-74-1974was included and
110
1969 was excluded. and so on. The moving CV
of rice yield plotted against time for different
agroclimatic zones (Fig. 3A,B) confirmed the
results discussed above. The variability in rice
yield maintained an increasing trend until the
mid-1980s and declined sharply thereafter in the
zones of the lower and northwest Middle
Gangetic Plains, Eastern Plains, and Plateau.
Variability was markedly high in the northwest
Middle Gangetic Plains and the Eastern Plains
during the late 1970s to the early 1980s. A
similar increasing pattern was also observed for
the eastern region as a whole, primarily because
these zones contribute nearly 75% of rice
production in eastern India. The yield in the
coastal zone remained quite unstable in the
second period also. But, in the northeast Middle
Gangetic Plains, rice yield, after showing some
degree of stability in the late 1980s, became
more unstable in the early 1990s because of
deficit rainfall in three consecutive years since
1991. To test the significance of the changing
pattern of rice yield variability in eastern India,
we fitted a quadratic trend line for the moving
CV of rice yield. and trend coefficients were
found to be highly significant (equation 3). This
clearly indicates that rice yield has become more
stable in recent years in a large part of eastern
India.
MCVt = 0.50 + 2.43 T*** - 0. 11 T2***;
(6.07) (6.31)
Adjusted R2 = 0.64*** (3)
where MCV, is the moving CV of rice yield for
the 5-year period ending in year t, T is the time
variable, and *** indicates significance at the
1 % level. Numbers in parentheses are t values.
Growth rate and annual percentage deviation
from the trend in yield were recomputed by
changing the cutoff year for the second time
period: (1) 1982-83 was included in the first
period and the second period started from 1983-
84, and (2) the second period started from 1981-
82. The change in cutoff point did not alter the
results (Table 10) and the conclusions drawn
were still valid. The only difference in the
results was that inclusion of 1982-83 in the first
period gave a significant decline in the
variability of rice yield in the Lower Gangetic
Plains and the increase in variability became
nonsignificant in the coastal zone. Rice yield
variability continued to show a significant
decrease during the second period in the
northwest alluvial part of the Middle Gangetic
Plains and the Eastern Plains and Highlands.
Conclusions and policy implications
This study has clearly shown that growth in rice
yield and production in eastern India has
accelerated since the early 1980s. Unlike in the
northern irrigated areas, yield growth mainly
contributed to growth in rice production in the
eastern region. Owing to differences in
agroclimatic factors and technology adoption,
the patterns of yield growth and variability are
rather diverse. Nearly 60% of the total rice area
in the eastern region having high and assured
rainfall or rapid expansion in irrigated area has
shown higher growth with a greater degree of
stability in rice yield. About 15% of the area has
not shown any change in either growth or
variability of yield, and one-fourth of the area
has a tendency to increase yield variability with
a moderate yield gain. The adoption of HYVs
primarily bred for irrigated areas in the erratic
and low-rainfall areas with low input use might
have increased yield variability. A negative and
highly significant effect of NPK fertilizer use, a
111
 Table 10. Sensitivity of yield variability to time period:

Growth rate (%) of yield Annual percentage deviation from trend in yield
Agroclimatic zone Time period
Period I Period II Period I Period II F ratio

Lower Gangetic Plains I: 1969-81; II: 1982-94 2.16*** 4.77*** 8.11 9.73 1.43
I: 1969-82; II: 1983-94 1.42** 3.65*** 10.10 4.58 (-)4.82***
I: 1969-80; II: 1981-94 2.79*** 5.06*** 6.71 9.65 2.07

Middle Gangetic Plains

Northwest Alluvial I: 1969-81; II: 1982-94 1.37 5.11*** 22.92 8.53 (-)7.21***
I: 1969-82; II: 1983-94 1.73 4.70*** 22.18 8.27 (-)7.18***
I: 1969-80; II: 1981-94 0.64 5.17*** 23.28 8.1 9 (-)8.0V**

Northeast Alluvial I: 1969-81; II: 1982-94 1.37 1.97 12.92 18.41 2.03
I: 1969-82; II: 1983-94 0.65 0.79 13.88 16.71 1.45
I: 1969-80; II: 1981-94 1.88 2.30* 12.89 17.84 1.92

Eastern Plateau and Hills

Eastern Plains I: 1969-81; II: 1982-94 -0.43 3.66*** 22.19 11.71 (-)3.58**
I: 1969-82; II: 1983-94 -0.51 2.79*** 21.26 9.98 (-)4.54***
I: 1969-80; II: 1981-94 -1.21 3.53*** 22.38 11.27 (-)3.94**

Eastern Highlands I: 1969-81; II: 1982-94 -0.39 3.24*** 22.50 10.19 (-)4.87***
I: 1969-82; II: 1983-94 -0.62 2.68*** 21.63 9.69 (-)4.98***
I: 1969-80; II: 1981-94 -0.96 2.89*** 23.13 10.21 (-)5.13***

Plateau I: 1969-81; II: 1982-94 -0.66 2.27** 17.57 14.24 (-)1.07

I: 1969-82; II: 1983-94 -1.30 1.02 14.93 10.91 (-)1.87
I: 1969-80; II: 1981-94 -0.36 2.66*** 15.16 14.07 (-)1.16

East Coast Plains I: 1969-81; II: 1982-94 1.32 4.59*** 11.57 18.39 2.52*
and Hills I: 1969-82; II: 1983-94 0.31 3.24** 14.19 15.80 1.34
I: 1969-80; II: 1981-94 1.74' 4.60*** 11.65 17.61 2.28*

Eastern India I: 1969-81; II: 1982-94 0.82 3.86** 10.65 9.11 (-)1.36
I: 1969-82; II: 1983-94 0.93 3.99*** 11.06 8.73 (-)1.60
I: 1969-80; II: 1981-94 0.44 3.99*** 10.66 8.73 (-)1.49
a
***, **, * = significant at 1%, 5%. and 10% level, respectively..

proxy for technology-related factors, indicates
that yield variability declined in areas where the
adoption of HYVs and the use of NPK has
occurred.
Although the level of relative variability in
yield and production does not appear to be very
high at the regional level, it is high at the district
level and, perhaps, could be even higher at the
farm level in absolute terms, adversely affecting
farmers and the rural poor, The effect of a
shortfall in yield would be far more serious in a
year of drought or flood. Since rice is a major
crop of the region, both ex ante and ex post
measures to deal with a drastic fall in production
are essential. Ex post management measures
such as public distribution of food grains and
employment generation programs are already
operating, albeit with varying degrees of
success. These should be strengthened and made
more pro-poor. In particular, regional allocation
of food grains for public distribution should be
congruent with the number of poor people in the
region, and the distribution should target the
rural poor (for details, see Pal et al 1993). Crop
insurance is another option to cope with risk,
but, in the absence of a detailed analysis, it is
rather unrealistic to talk about its feasibility or
effectiveness for rainfed production systems.
A long-term strategy to check a sharp
shortfall in production should incorporate
appropriate measures in the development
strategy. Product diversification toward high-
value horticultural crops in low-potential rainfed
areas is often talked about to minimize risk and
raise farm income. This option should be viewed
from two considerations, besides assessing the

112
 availability of postharvest product-handling
facilities. First, scope for diversification in low
and deepwater lands is limited, as rice is the
most suitable crop for these environments.
Second, one of the preconditions of
diversification is that rice yield should be
increased in irrigated areas to meet demand and
to check the increase in rice prices. This calls for
accelerating research efforts to push the rice
yield potential up in irrigated areas. A more
effective strategy would be to strengthen
research and development efforts for the rainfed
rice production systems. Undoubtedly, the
benefits of crop improvement research for
developing tolerance for biotic and abiotic
stresses in varieties would be comparable with
those achieved in irrigated areas. In addition, the
impact of research on poverty alleviation would
be much more visible in rainfed areas. Given the
availability of rainwater and the unabated land
degradation in rainfed areas, research on
resource management deserves equal priority.
Considering the diversity of the production
system, research investment should be enhanced
and the focus should be on on-farm or farmer
participatory research. This calls for the
strengthening of regional agricultural research
stations in the region. Similarly, technology,
input, and information delivery systems have to
be more organized and responsive to meet the
diverse needs of the farmers. Finally,
development priorities such as public investment
in land improvement including flood control and
development of irrigation, rural institutions, and
other infrastructure facilities should be
commensurate with the problems and potential
of the rainfed areas.
References
Ballabh V, Pandey S. 1999. Transitions in rice
production systems in eastern India. Econ.
Pol. Wkly. 34(13):A11-A16.
Bhatia MS. 1999. Rural infrastructure and
growth in agriculture. Econ. Pol. Wkly.
34(13):A43-A48.
Chand R. 1999. Emerging crisis in Punjab
agriculture: severity and options for future.
Econ. Pol. Wkly. 34(13):A2-A16.
Cuddy JDA, Della Valle PA. 1978. Measuring
the instability of time series data. Oxford
Bull. Econ. Stat. 40(1):79-85.
Dhawan BD. 1987. How stable is Indian
irrigated agriculture. Econ. Pol. Wkly. A93-
96.
Ghosh SP. 1991. Agro-climatic zone-specific
research: Indian perspective under NARP.
Indian Council of Agricultural Research,
New Delhi, India.
Hazell PBR. 1982. Instability in Indian
foodgrain production. Research report 30,
IFPRI, Washington, D.C. (USA):
International Food Policy Research Institute.
Naylor R, Falcon W, Zavaleta E. 1997.
Variability and growth in grain yields, 1950-
94: Does the record point to greater
instability? Popul. Dev. Rev. 23(1):41-58.
Pal S, Sirohi AS. 1989. Instability in Indian crop
production: its magnitude and sources. Artha
Vijnana 31(3):241-256.
Pal S, Bahl DK, Mruthyunjaya. 1993.
Government interventions in foodgrain
markets: the case of India. Food Policy.
Planning Commission. 1989. Agro-climatic
regional planning: an overview. New Delhi,
India.
Rao CHH. 1994. Agricultural growth, rural
poverty and environmental degradation in
India. Delhi (India): Oxford University
Press.
Rao CHH, Ray SK, Subbarao K. 1988. Unstable
agriculture and droughts. New Delhi (India):
Vikas Publishing House.
Ray SK. 1983. An empirical investigation of the
nature and causes for growth and instability
in Indian agriculture. Indian J. Agric. Econ.
38(4):459-474.
Singh AJ, Byerlee D. 1990. Relative variability
in wheat yields across countries and over
time. J. Agric. Econ. 41:21-32.
113
Discussion Appendix 1. list of districts included in the study by region.

Northern region Bihar

Question: If you include other variables like Bhagalpur
Punjab Champaran
rainfall, radiation, area under HYVs, Amritsar Darbhanga
besides fertilizer use, it would further Ferozpur Dhanbad
Gurdaspur Gaya
explain differences in yield Kapurthala Hazaribagh
variability. Jallandhar Monghyr
Ludhiana
Answer: Yes, I agree. The explanatory power Patiala
Muzaffarpur
Palamau
must increase as more variables that Sangrur Patna
determine yield fluctuations are Purnea
Haryana Ranchi
included. However, there are serious Karnal Saharsa
constraints on the availability and Ambala Santhal Pargana
Saran
accuracy of these data at the district Eastern region Sahabad
level. Singhbhum
Eastern Uttar Pradesh
Question: The analysis of changes in the Allahabad Orissa
variance of production between the Azamgarh Balasore
Bahraich
two time periods indicates increase in Bolangir
Ballia Cuttack
the variability. On the contrary, the Faizabad Dhenkanal
CV measure used in the later part of Ghazipur Ganjam
Jaunpur Kalahandi
the paper shows a different picture. Mirzapur Keonjhar
Answer: Variance and CV are two different Pratapgarh Koraput
Sultanpur Mayurbhanj
measures of variability (absolute and Varanasi Phulbani
relative measures, respectively) Puri
Eastern Madhya Pradesh Sambalpur
which have different meanings for Balaghat Sundergarh
policy recommendations. In terms of Bastar
Bilaspur West Bengal
variance, the variability has increased Durg 24-Parganas
over time. But for cross-sectional Jabalpur Bankura
comparison, relative measure, i.e. Mandla Birbhum
Raigarh Burdwan
CV, is more appropriate, which Raipur Cooch-Behar
shows a diversity of patterns. For the Seoni Darjeeling
Shahdol Hooghly
national authorities in charge of Surguja Howarh
managing food supplies, the CV may Jalpaiguri
Malda
be more relevant as it is a Midnapore
dimensionless measure. Murshidabad
Nadia
Purulia
West Dinajpur

Notes Citation: Pandey S, Barah BC, Villano RA, Pal

Authors’ addresses: S. Pal, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India; S. Pandey, and
Abedullah, International Rice Research
Institute, MCPO Box 3127, Makati City
1271, Philippines.
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

114
Rainfed rice and risk-coping strategies: some
microeconomic evidence from eastern Uttar
Pradesh
S. Pandey, H.N. Singh, and R.A. Villano

Risk management is one important aspect of rainfed rice production activities. In rainfed
environments, variability of rainfall can lead to a wide variability of output and production.
Farmers in this environment have evolved several coping strategies to deal with risk. This
paper examines variability in rainfed rice production and farmers coping mechanisms using
farm-level panel data from eastern Uttar Pradesh. The results of this study showed that
farmers use a range of strategies to cope with risk. These include changing the proportion of
rice area, adjusting the area under traditional varieties, growing several rice varieties, and
changing rice establishment methods. Crop and income diversification was found to be
another important farmer strategy for dealing with risk. Through these measures, rainfed rice
farmers in eastern Uttar Pradesh have been able to maintain their total income even in the
face of a sharp decline in rice income. The implications of these results for technology design
and policy reforms are discussed in this paper.

An intrinsic feature of agricultural production is the chances of negative consequences are

its riskiness. The major sources of risk in
agriculture are the unpredictable variations in
yield and prices of inputs and outputs. Risk
under rainfed conditions generally tends to be
high as variability of rainfall can lead to wide
swings in yield and output. Over time, farmers
have developed various strategies to avoid the
negative consequences of unpredictable
variations in agricultural output. A good
understanding of these strategies is required to
assess the likely responses of farmers to new
technologies or policies. The uptake of
technologies that complement and reinforce
farmers’ coping strategies is to be quite rapid.
On the other hand, interventions that undermine
the key components of risk management
strategies are likely to be rejected.
Coping strategies can be classified into ex
ante or ex post, depending on whether they help
reduce risk or reduce the impact of risk after a
production shortfall has occurred. Because of a
lack of efficient market-based mechanisms for
diffusing risk, farmers modify their production
practices to provide “self-insurance” such that
reduced to an acceptable level. Ex ante strategies
are designed to provide such self-insurance,
which, however, can be costly to farmers in
terms of opportunities forgone.
Ex ante strategies can be broadly grouped
under two categories: those that reduce risk by
diversification and those that do so by
maintaining flexibility. Diversification is simply
captured in the principle of “not putting all eggs
in one basket.” Being involved in several
economic activities that have negatively or
weakly correlated returns reduces the risk of
income shortfall. This principle is used in
different types of diversification common in
rural societies. Examples are spatial
diversification of farms, diversification of
agricultural enterprises, and diversification
between farm and nonfarm activities.
Maintaining flexibility is an adaptive
strategy that allows farmers to switch resources
between activities as the situation demands.
Flexibility not only allows farmers to reduce the
chances of low income but also helps to capture
income-increasing opportunities when they do

115
 arise. Flexibility is high when losses associated
with reallocation of resources are low. Instead of
committing all resources prior to the occurrence
of uncertain events, flexibility is maintained by
being able to adjust decisions to current values
of uncertain events. Examples are using a split
dose of fertilizer, temporal adjustment of input
use to crop conditions, and expanding the area
allocated to a crop when climatic conditions are
more favorable to that crop.
Ex post strategies are designed to prevent a
shortfall in consumption when family income
drops below what is necessary for maintaining
consumption at its normal level. These include
seasonal migration, consumption loans, asset
liquidation, and charity. A consumption shortfall
can occur despite these ex post strategies if the
drop in income is substantial.
The objective of this paper is to characterize
risk in rice production and document farmers’
risk management strategies in eastern Uttar
Pradesh. The analysis is based on panel data
collected from a group of farmers from two
adjacent villages that differ mainly in risk in rice
production because of their differential access to
irrigation. Three types of analyses are
conducted. First, intervillage comparisons of
production systems are made to assess the
differential impact of risk on the broader
characteristics of the village economy and the
rice production systems. The land use patterns
and the structure of the village economy can be
expected to capture the long-term adjustments
that may have occurred over rime in these
villages. Some of these adjustments could at
least be partly in response to risk. Within a
village, changes in rice production practices and
income strategies over time are also examined to
document how farmers deal with uncertainty in
rainfall. As the nature of risk responses may be
conditional on economic status, risk responses
are also examined by farm size category.
Study approach
Even though the potential impact of risk and risk
aversion on farmer behavior is well recognized,
insufficient attention has been given to
characterizing the nature of risk faced by rainfed
116
rice farmers and their responses. The study of
risk and risk management strategies requires
temporal data as it is the fluctuation in
production and income over time that is of
concern to individual farmers. Such farm-level
data, however, are generally not available. As a
result, analysts are often forced to use cross-
sectional farm-level data or aggregated time-
series data. Although useful in some contexts,
such analyses cannot adequately describe the
nature of risk facing farmers and how they
manage the risk.
The study approach consists of a microlevel
analysis of risk and its management by rainfed
rice farmers using temporal data. To this end, the
collection of panel data in eastern Uttar Pradesh
started in 1994 in two villages of Faizabad
District. The selected villages were Mungeshpur
and Itgaon. These two villages differ in several
aspects, the major difference being with respect
to access to irrigation. Mungeshpur farmers have
a greater access to irrigation than farmers in
Itgaon. Since irrigation reduces risk associated
with rice production, the production system of
Mungeshpur serves as a reference point against
which the effect of risk in Itgaon can be
assessed. The two villages are only a few
kilometers apart; hence, the effects of other
variables such as differences in market access
and climate on the nature of production systems
are likely to be minimal.
Farmers were first stratified by farm size
category into small (up to 1 ha), medium
(between 1 and 2 ha), and large (more than 2
ha). The number of farmers selected randomly
from each stratum corresponded to their
proportion in the overall population. Altogether,
30 farmers from each village were selected and
detailed data on rice production practices and
other farm and nonfarm activities were collected
using the interview method. The sample size
was increased from 30 to 45 in 1996. Most of
the results presented below pertain to the 5 years
spanning the period 1994-98.
Table 1 summarizes the major charac-
teristics of the study villages. The average
operational holding is 50% smaller in Mungesh-
pur than in Itgaon. Farmers in Itgaon also hold
proportionately more upland fields, which are
Table 1. Village characteristics.

Mungeshpur ltgaon
Characteristic
Small Medium Large All farms Small Medium Large All farms
farmers farmers farmers farmers farmers farmers

Number of households 36 7 2 45 22 12 11 45
Irrigated area (%) 93 74 75 85 34 35 39 37
Av operational holding (ha) 0.5 1.5 2.2 0.7 0.5 1.4 2.9 1.4
Proportion of land type (%)
Upland 38 44 24 34 59 60 48 55
Medium land 6 16 43 14 15 21 34 24
Lowland 57 40 33 52 26 20 18 21
Av years of schooling of household head 5 8 12 5 3 8 9 6
Av household size (no. of members) 7 9 7 7 7 8 9 8
"

Table 2. Kharif-season rainfall for Kumarganj, Fairabad, 199498.

June July August September October Total

Year
No. of Rainfall No. of Rainfall No. of Rainfall No. of Rainfall No. of Rainfall No. of Rainfall
rainy (mm) rainy (mm) rainy (mm) rainy (mm) rainy (mm) rainy (mm)
days days days days days days

1994 8 145 15 224 16 341 6 153 1 2 46 865

1995 8 109 7 60 23 355 10 395 0 0 48 919
1996 11 99 5 133 18 337 14 168 3 165 51 902
1997 4 121 19 485 15 264 12 294 2 43 52 1,207
1998 4 29 19 337 16 276 6 110 2 47 47 799

Central Research Station, Masodha. Faizabad (1968-98)

Long-term mean
rainfall (mm) 145 314 300 141 74 1,088

CV of long-term
rainfall (%) 87 45 40 56 115 22

fields in the upper part of the toposequence.
Since the hydraulic gradient decreases and the
clay content of the soil generally increases with
a move down the toposequence, upland fields
tend to be relatively drought-prone, whereas
lowland fields tend to be submergence-prone.
The classification of field types was based
purely on farmers' classifications. Farmer
classification of field characteristics has been
found to correspond well with scientific
classification (Talawar 1996), indicating that this
is a rapid and cost-effective method of
characterizing fields. In Mungeshpur, nearly
85% of the fields have access to irrigation,
whereas less than 40% of the area in Itgaon is
irrigated. In addition, the reliability of irrigation
also differs between these two villages as
Mungeshpur has more private tubewells, which
supply water with a greater reliability than
public tubewells that are the major source of
irrigation in Itgaon. Except for farm size, extent
and nature of irrigation, and composition of land
types, other characteristics are similar in these
two villages.
Rainfall analysis
The average total rainfall based on weather
records from Masodha (about 25 km from the
study villages) for 1968-98 for June to
December is 1,088 mm with a CV of 22% (Table
2). The rice production environment of the
region can be considered to be drought-prone,
especially in October, when rice may be in the
critical growth stage of heading (or grain fill).
Rainfall at the beginning of the season (i.e.,
June) is also characterized by a high degree of
uncertainty as attested by its high CV.
The analysis of rainfall data indicates that
farmers in these villages have to deal with the
uncertainty of moisture conditions at both the
initial stage of land preparation and rice

117
establishment (June-July) and during the later
stage of crop development (October). While the
uncertainty of rains during the start of monsoon
may encourage farmers to wait for land
preparation and planting until sufficient moisture
has been accumulated, such a strategy has to be
balanced against the possibility of the crop
suffering from a terminal drought if planting is
too late. In other words, the rainfall pattern
would dictate a strategy of rapid early planting
as soon as conditions become favorable so that
terminal drought could be avoided. Under
predominantly rainfed conditions of Itgaon, the
optimal planting window will therefore be
narrow. In Mungeshpur, this constraint may be
less severe as farmers can establish rice earlier
using irrigation even if rains are late.
Figure I presents the rainfall data from a
monitoring station closer to the surveyed
villages for 1994-98. Compared with 1994 and
1997, rainfall in June and July was much lower
in 1995 and 1996. Of the two drought years,
1995 and 1996, the early-season (June and July)
drought in 1995 appears to be more serious than
in 1996. In 1998, rain began relatively late and
118
terminated quite early. Judging by the
distribution and amount of rainfall, 1994 and
1998 may be classified as “normal” years, 1995
and 1996 as “drought” years, with drought being
more severe in 1995, and 1997 as a “good” year.
Farmers’ responses to these temporal differences
in rainfall patterns are explored later in the
paper.
Intervillage comparison
Spatial diversification of fields
Scattering of fields over different landscape
positions can help reduce the overall production
risk if yields across field types are negatively or
poorly correlated. Scattering of fields has been
an important mechanism used by farmers,
especially in the semiarid areas (Walker and
Jodha 1986).
Most farmers in both villages have their
fields distributed over all land types (upland,
medium, and lowland). In terms of
fragmentation, nearly 80% of the farmers in
Itgaon have their fields scattered in three or
more parcels, whereas the corresponding figure
for Mungeshpur is only 32% (Fig. 2). Land is
thus more scattered in Itgaon than in
Mungeshpur. It is, however, not clear whether
greater fragmentation in Itgaon is the result of its
higher level of production risk. The extent of
land fragmentation depends on many other
factors such as farm size, inheritance law, and
land reform regulations. Given the proximity of
these villages and their similarity in social
structure, the effect of inheritance law and land
reform regulations is likely to be similar. A
greater fragmentation in Itgaon is probably a
function of its larger average farm size.
ranges between zero and unity and is calculated
as
DIi = 1 - S (a ij /Saij)2 (1)
j j
where aij is the area under the jth crop in the ith
village (or season). The diversification indices
(Table 3) indicate that cropping pattern in Itgaon
is more diversified than in Mungeshpur for both
the kharif and rabi seasons. In Itgaon, farmers
grow rice in a proportionately smaller area than
in Mungeshpur and rely more on pulses and
maize, which grow well under rainfed
conditions. Mixed cropping and intercropping

Diversification of cropping pattern Table 3. Crop diversification index.

Mungeshpur ltgaon
Diversification of cropping pattern is a way of Year
Kharif Rabi Kharif Rabi
reducing risk. If crop yields are poorly
correlated, increasing the number of crops can 1994 0.47 0.56 0.72 0.71
reduce the variability of total output. We have 1995 0.53 0.55 0.90 0.77
1996 0.58 0.57 0.82 0.67
used the Simpson diversification index (DI) to 1997 0.50 0.53 0.75 0.68
measure the extent of diversification. The index 1998 0.45 0.53 0.78 0.62

119
Table 4. Percentage of area by variety.

Mungeshpur ltgaon
Farm size Variety
1994 1995 1996 1997 1998 Av 1994 1995 1996 1997 1998 Av

Marginal Modern 84 81 93 94 100 91 31 60 38 33 32 37

Traditional 16 19 7 6 0 9 69 40 62 67 68 63
Medium Modern 81 88 92 90 97 90 61 41 42 40 67 51
Traditional 19 12 8 10 3 10 39 59 58 60 33 49
Large Modern 95 97 93 90 96 94 77 73 62 73 78 73
Traditional 5 3 7 10 4 6 23 27 38 27 22 27
All farms Modem 89 92 93 91 97 93 67 64 53 61 67 62
Traditional 11 8 7 9 3 7 33 36 47 39 33 38

Table 5. Varietal composition (%) by farm size and duration.

Mungeshpur ltgaon
Farm size Durationa
1994 1995 1996 1997 1998 Av 1994 1995 1996 1997 1998 Av

Small Short 27 30 34 19 20 26 79 88 79 92 73 81
Medium 22 34 48 67 64 47 5 12 21 6 21 14
Long 51 36 19 14 16 27 16 0 0 2 5 5
Medium Short 36 44 26 27 12 28 62 53 71 85 87 77
Medium 26 40 57 70 88 58 20 6 28 15 11 17
Long 37 17 17 3 1 14 18 41 2 0 2 6
Large Short 19 15 30 33 23 25 52 58 40 58 46 51
Medium 31 14 36 47 55 40 31 24 45 41 54 41
Long 50 70 35 20 22 35 18 18 14 2 0 9
All farms Short 26 25 30 30 21 26 58 66 55 67 61 61
Medium 28 24 44 56 63 46 25 17 36 31 37 31
Long 46 51 27 15 17 28 18 16 9 2 1 8

Short = <120 d. medium = 120-135 d. long = >135 d.

a

are also more common in this village. The Rice varieties

average number of intercrops over the 5 years in
the kharif season in Itgaon was 19, while the
corresponding figure for Mungeshpur was only
11. In terms of land type, upland fields generally
have a more diversified cropping pattern than
medium and lowland fields as upland fields are
less prone to submergence.
Crop diversification may occur for several
reasons, in addition to risk reduction (Smale et a1
1994). Differences in land quality can lead to
crop diversification even if yields are
deterministic. For crop diversification to be an
effective strategy for risk reduction, the temporal
correlation of yield between different crops must
be low. We have not examined yield correlation
as the precision of correlation estimated on the
basis of 5 years of data is likely to be low.
Furthermore, yield data for several intercrops
occupying small areas are likely to be imprecise.
Instead of yield correlation, we later assess how
the variability of crop income is affected by crop
diversification.
In Mungeshpur, about 93% of the total rice area
is planted to modern varieties. The adoption of
modem varieties in Itgaon is lower and varies
between 37% and 73% (Table 4). In Itgaon, the
adoption of modem varieties is correlated with
farm size, whereas adoption in Mungeshpur is
high, irrespective of farm size. Short-duration
varieties occupy proportionately more area in
Itgaon than in Mungeshpur (Table 5). The lower
rate of adoption of modem varieties and the
greater importance of short-duration varieties in
Itgaon are probably adaptations to the more
moisture-deficient environment in this village.
To the extent that yields of different rice
varieties are poorly correlated, growing of
several varieties can reduce the overall risk. To
examine whether there are any systematic
differences in varietal diversity of rice, we
calculated the diversity index using equation (1)
where a,, in this case refers to area planted for
the jth variety in the ith village. The varietal

120
 diversity index for both villages averaged 0.85,
indicating that diversification into several
varieties as a way to reduce risk is not
necessarily more important in Itgaon than in
Mungeshpur.
Rice establishment methods
Farmers in the study villages practice all three
methods of crop establishment—dry seeding,
wet seeding, and transplanting. Dry seeding
consists of broadcasting rice seeds in dry soils.
Wet seeding consists of broadcasting
pregerminated rice seedlings in puddled soils.
Transplanting consists of pulling the seedlings
established in the seedbed and replanting them
in the main field. As the field's hydrological
conditions that are optimally suited for these
three methods are different, farmers can be
expected to switch from one method to another
as well as expand or decrease the area under a
specific method in response to climatic
conditions.
Under purely rainfed conditions, preparation
of the seedbed and sowing of seeds cannot be
done without sufficient rain. Similarly,
preparation of the main field for transplanting
requires a sufficient amount of rain. Farmers
who do not have access to irrigation have to wait
until sufficient rains have been received to
prepare the seedbed. If the rainfall is higher than
expected, the transplanted area may be expanded
if sufficient seedlings are available (or by
purchasing seedlings from those who may have
excess seedlings). However, if the rainfall is late
and/or lower than expected so that transplanting
is not possible, the field may be dry- or wet-
seeded.
Transplanting is by far the most dominant
method of crop establishment in Mungeshpur
(Table 6). Availability of supplemental irrigation
has made transplanting in more than 75% of the
area feasible in Mungeshpur, even in drought
years such as 1995 and 1996. In Itgaon,
however, even in the most favorable rainfall
condition of 1997, the area transplanted was
only 53%. The favorable rainfall in 1998
allowed farmers to increase the area
transplanted.
Farmers often use more than one method of
crop establishment within a season for a variety
of reasons such as risk reduction, staggering of
labor demand, and better matching with field
conditions. In Mungeshpur, about 60% of the
farmers in each of the years practiced only one
method in all of their fields (Table 7). The
remaining used a combination of methods, with
transplanting being the dominant one. A
relatively favorable environmental condition in
Mungeshpur probably led to the dominance of
the use of the single most profitable method.
One would expect more farmers in Itgaon to
establish their rice crop by a combination of
methods. This expectation is supported by the
data.

Table 6. Percentage of area, by crop establishment method and farm size.

Crop Mungeshpur ltgaon

Farm establishment
size methoda 1994 1995 1996 1997 1998 Av 1994 1995 1996 1997 1998 Av

Small DSR 12 12 4 46 44 52 9 10 33
TPR 94 70 88 92 98 90 20 41 36 15 58 35
WSR 6 18 8 2 5 34 14 12 76 32 33

Medium DSR 5 1 11 3 16 94 43 0 4 17
TPR 65 70 75 90 99 81 37 0 46 42 64 46
WSR 30 28 14 10 1 16 48 6 10 58 32 37

Large DSR 7 1 11 47 35 3 8 15
TPR 78 79 91 85 93 87 27 49 55 64 76 55
WSR 15 21 8 15 7 12 62 4 10 33 16 31

All farms DSR 5 2 5 2 17 54 40 3 8 18

TPR 78 76 86 88 95 86 27 39 49 53 70 49
WSR 17 23 8 12 5 12 55 7 11 44 23 32

DSR = dry-seeded rice, WSR = wet-seeded rice, TPR = transplanted rice.

a

121
Table 7. Percentage of rice farmers using different methods of crop establishment.

No. of Mungeshpur ltgaon

Farm methods
size used 1994 1995 1996 1997 1998 Av 1994 1995 1996 1997 1998 Av

Small One 73 80 100 93 93 89 51 90 84 80 84 78

Two 27 20 7 7 11 50 10 15 20 15 22
Three
Medium One 57 55 70 85 90 73 17 50 44 21 46 34
Two 29 44 31 15 10 25 83 50 33 79 54 61
Three 14 2 22 5
Large One 38 73 64 28 68 54 25 80 50 37 54 40
Two 50 27 29 72 32 42 75 20 42 58 37 46
Three 12 7 4 8 5 9 5
All farms One 60 70 79 64 82 72 33 a3 65 42 62 54
Two 33 30 17 36 18 27 66 18 27 57 37 44
Three 7 2 2 8 2 3 3

Variability of yield and net returns estimated after purging the data of these fixed
effects.
The average yield and variability of rice were The average rice yield in Mungeshpur is
estimated by pooling the cross-sectional and about 0.5 t ha-1 more than in Itgaon (Table 8).
time-series data. Such data capture two sources The variability in rice yield, as measured by the
of variability. Yield variability from plot to plot CV, however, is lower. A higher mean and a
within a year is due mainly to differences in soil lower CV indicate a more favorable
type and management practices. For a given environmental condition for rice production in
plot, yields vary over time because of Mungeshpur. Farmers grow modem varieties in
fluctuations in climatic events and changes in a bigger area and use more fertilizer in
management practices. Variability over time is Mungeshpur than in Itgaon. Lower risk because
the main concern of farmers, as it influences of greater availability of irrigation may have
their decisions regarding rice production. Thus, encouraged the adoption of modern varieties and
it is essential to separate out temporal variability fertilizers in Mungeshpur.
from spatial variability. Although a range of The average net return from rice in Itgaon is
methods are available to achieve this (Judge et al almost half its value in Mungeshpur. The CVs of
1985), we used the simple dummy variable net return in Mungeshpur (67%) and Itgaon
model by assuming that the farmer and land (86%) suggest high profit variability associated
types have fixed effects. Variability was with rice production in these villages. The
coefficient of skewness of yield, gross returns,
Table 8. Measures of probability distribution of plot-level and net returns indicates an approximately
rice yield, net returns, and nitrogen use in rice, 1994-98.
symmetrical probability distribution. The
Item Mungeshpur ltgaon approximate normality of the distributions of
yield and net returns indicates that risk analysis
Yield
Mean (t ha-1) 2.2 1.7 based on mean and variance may be sufficient
CV (%) 52 60 for evaluating risk effects.
Skewness 2.86 0.8
Gross returns The CVs of nitrogen application from
Mean (Rs ha-1) 6.592 4.426 chemical fertilizers are similar to those of net
CV (%) 54 62
Skewness 3.1 8 0.92 returns. The coefficient of skewness is higher in
Net returns Itgaon, indicating a more skewed use of
Mean (Rs ha-1) 5.343 3.250
fertilizer in this village. A positive skewness
CV (%) 67 86
Skewness 2.55 1.00 indicates that only a few farmers are using larger
Nitrogen quantities of fertilizer, while the majority use
Mean (kg ha-1) 35 30
CV (%) 60 74 very little. Small and medium farmers may face
Skewness 0.53 0.9

122
more parcels, whereas the corresponding figure
for Mungeshpur is only 32% (Fig. 2). Land is
thus more scattered in Itgaon than in
Mungeshpur. It is, however, not clear whether
greater fragmentation in Itgaon is the result of its
higher level of production risk. The extent of
land fragmentation depends on many other
factors such as farm size, inheritance law, and
land reform regulations. Given the proximity of
these villages and their similarity in social
structure, the effect of inheritance law and land
reform regulations is likely to be similar. A
greater fragmentation in Itgaon is probably a
function of its larger average farm size.
ranges between zero and unity and is calculated
as
DIi = 1 - S (a ij /Saij)2 (1)
j j
where aij is the area under the jth crop in the ith
village (or season). The diversification indices
(Table 3) indicate that cropping pattern in Itgaon
is more diversified than in Mungeshpur for both
the kharif and rabi seasons. In Itgaon, farmers
grow rice in a proportionately smaller area than
in Mungeshpur and rely more on pulses and
maize, which grow well under rainfed
conditions. Mixed cropping and intercropping

Diversification of cropping pattern Table 3. Crop diversification index.

Mungeshpur ltgaon
Diversification of cropping pattern is a way of Year
Kharif Rabi Kharif Rabi
reducing risk. If crop yields are poorly
correlated, increasing the number of crops can 1994 0.47 0.56 0.72 0.71
reduce the variability of total output. We have 1995 0.53 0.55 0.90 0.77
1996 0.58 0.57 0.82 0.67
used the Simpson diversification index (DI) to 1997 0.50 0.53 0.75 0.68
measure the extent of diversification. The index 1998 0.45 0.53 0.78 0.62

119
Fig. 3. Relationship between the coefficient of variation (CV) of rice income and the CV of kharif income.

124
125
Table 9. Different sources of household income.

Mungeshpur ltgaon
Source
1994 1995 1996 1997 1998 AV 1994 1995 1996 1997 1998 Av

Total household income

(000 Rs household-1) 18.8 16.6 19.3 15.9 16.4 17.4 25.1 21.6 26.8 21.0 20.2 22.9
% Share
Rice 9 15 11 20 22 15 3 1 4 13 6 5
Wheata 23 17 26 17 20 21 14 18 23 21 20 19
Other cropsb 19 28 18 13 17 19 28 24 17 14 24 21
Livestock 9 4 3 3 3 4 5 1 3 7 0 3
Farm labor 5 2 1 1 1 2 1 1 1 1 0 1
Nonfarm activitiesc 35 35 41 45 35 38 48 55 52 43 50 50
Othersd 2 0 0 0 1 1 1 0 1 1 0 0
Total 100 100 100 100 100 100 100 100 100 100 100 100
a
Includes the value of intercrops such as mustard. blncludes other rabi and zaid (third-season) crops. “Includes services, laborer, business, barber,
blacksmith, and pensions. dlncludes the sale of fruits and timber.

important in Itgaon than in Mungeshpur as The relative importance of area under

indicated by the relatively larger number of
scatter points below the 1:1 line.
Tactical adjustments
This section focuses on how farmers responded
to different patterns of rainfall experienced in
the survey years. We examine the responses
mostly in the context of rice production.
Comparisons are made for a village over time as
well as between the two villages. We analyze the
response in terms of area of rice planted, method
of rice establishment, and changes in rice
varieties.
Area of rice planted
In both Mungeshpur and Itgaon, rice area
decreased in 1995 and I996 compared with 1994
and 1997 (Table 10). The decrease in rice area in
Itgaon is much sharper than in Mungeshpur.
Delayed rainfall in 1995 forced many farmers in
Itgaon to forgo rice completely, whereas farmers
in Mungeshpur were able to maintain the rice
area by using irrigation. Although some of the
rice area was diverted to less moisture-sensitive
crops such as pulses, maize, and various types of
intercrop, most of the rice land was left fallow in
Itgaon. The area under fallow declined in 1996
when the early-season drought was less severe.
In 1997, when the rainy season was favorable,
the rice area increased beyond its share in 1994.
various crops and fallow during 1994-98
indicates that the initial response to the early-
season drought is to reduce the area under rice
and allocate the area to less moisture-sensitive
crops. Most of this type of adjustment occurs in
the upland and medium land fields. When the
early-season drought is more severe, farmers
fallow the land completely, especially the
lowlands that have poor access to irrigation.
Unlike with the upland fields, alternative options
in these lowland fields are very limited as poor
drainage of these fields results in waterlogging
once the rains commence. Large fluctuations in
area planted to rice in rainfed environments can
be a major source of variability in rice
production unless there are corresponding
offsetting movements in yields. The relative
contribution of variations in area and yield to the
total production variance was examined using
village-level data for 1994-98 (Table 11). In
Itgaon, the variability in area accounts for about
42% of the total production variation. In
addition, about a quarter of the production
variance can be attributed to the positive
correlation between yield and area. Thus, in
drought years, rice output declines not only
because of a reduction in area but also because
of the lower yield in the area planted. These
effects are much smaller in Mungeshpur where
planting decisions are less dependent on rainfall.
In addition to technologies for greater yield
stability, the high risk of failure to plant in

126
127
 Table 10. Percentage of area under different crops.

Mungeshpur ltgaon
Cropping pattern
1994 1995 1996 1997 1998 Av 1994 1995 1996 1997 1998 Av

Kharif
Fallow 17 20 15 16 12 16 33 48 33 27 29 34
Rice 60 53 54 59 65 58 32 10 24 35 26 25
Fodder 7 4 6 6 7 6 7 5 6 5 6 6
Sugarcane 6 13 10 8 7 9 2 7 5 3 5 4
Maize 2 2 4 3 1 2 6 7 8 10 8 8
Othersa 7 8 11 8 8 8 19 22 24 21 26 22

Rabi
Fallow 12 8 9 15 5 10 18 22 24 18 7 18
Wheat + oilseeds 58 52 56 60 63 58 40 41 46 46 52 45
Pulses + oilseeds 11 11 9 8 12 10 22 17 17 15 20 18
Sugarcane 8 14 9 1 7 8 2 6 0 2 2 2
Vegetables 3 2 7 5 6 5 5 5 4 5 7 5
Pulses 0 2 6 5 5 4 4 5 7 8 5 6
Othersb 7 10 4 6 2 6 8 4 2 5 7 5

Zaid
Fallow 80 77 82 99 85 85 97 92 100 100 99 98
Pulses 8 7 7 0 6 6 1 1 0 0 1 1
Sugarcane 8 13 9 0 7 7 2 7 0 0 0 2
Othersc 5 2 2 1 2 2 0 1 0 0 0 0

aIncludes sweet potato, cereal and pulses. pigeonpea and mixed cereals. lncludes pulses, fodder, vegetables, oilseeds, vegetables + oilseeds.
b

cIncludes vegetables, fodder, pulse + oilseed. cereal + oilseeds.

Table 11. Decomposition of rice production variance, 1994- Method of rice establishment
98.

Source Mungeshpur ltgaon As seasonal conditions vary from year to year,

Area variance (%) 16
Yield variance (%) 52
Area and yield
covariance (%) 23
Residual (%) 9 7
rainfed environments highlights the need to deal
with that type of risk also. Research to reduce
area variability and the correlation between area
and yield has not been given as much attention
as research to reduce yield variability.
Technologies that permit late planting (such as
short-duration varieties, tolerance for
transplanting of older seedlings) can be useful in
this regard.
The diversification index also indicated that
crop diversification in the kharif season in
Itgaon was higher in the unfavorable years of
1995 and 1996 compared with 1994 and 1997
(Table 3). Farmers may have used a greater
degree of crop diversification to reduce risk in
these unfavorable years.
42 farmers respond by adjusting their crop
26 establishment methods. A farmer who
25
transplanted all rice fields in one year may
choose to wet-seed the following year if the field
hydrology is suboptimal for transplanting.
Similarly, a farmer who dry-seeded all rice fields
in one year may subsequentIy wet-seed one part
and transplant the other. In addition to seasonal
conditions, variations in other factors such as
labor supply, working capital, and pest problems
also play a role in the decision-making process.
Temporal variations in each of the crop
establishment methods are higher in Itgaon than
in Mungeshpur. Neary 20% of the farmers in
Mungeshpur used the transplanting method in all
their fields during 5 years. In contrast, none of
the Itgaon farmers maintained the same method
of crop establishment in a field over time. In
Mungeshpur, farmers appear to be switching out
of wet seeding to transplanting in more
favorable years and vice versa in less favorable
years. In Itgaon, the switch seems to occur

128
Table 12. Area (%) under different duration of varieties and crop establishment methods.a

1994 1995 1996 1997 1998 Av

Village Duration
DS+WS TP DS+WS TP DS+WS TP DS+WS TP DS+WS TP DS+WS TP

Mungeshpur Early 53 18 40 21 65 24 78 23 59 19 58 21
Medium 10 33 12 28 25 47 13 62 39 64 17 51
Long 37 49 49 51 10 30 9 15 2 17 26 29
ltgaon Early 63 44 84 38 79 30 98 41 93 48 81 41
Medium 14 55 5 37 6 68 1 57 7 50 7 56
Long 24 1 11 25 16 1 1 2 0 2 12 3

aDS = dry seeding, WS = wet seeding, TP = transplanting.

between dry-seeded rice and wet-seeded rice
(depending on whether the soil is wet or dry)
and also between transplanted rice and wet-
seeded rice (depending on availability of
seedlings and labor constraint).
These adjustments in crop establishment
methods are manifestations of flexibility that
farmers exploit to deal with the uncertainty of
the rainy season. Implications are that, if rainfed
farmers were to rely on a single method, they
would lose such flexibility in adapting to
environmental conditions. Crop breeding
programs can help maintain flexibility by
developing varieties that are well adapted to
different methods of establishment.
Varieties
The adoption of modem varieties (MVs) in
Itgaon is not only lower than in Mungeshpur; the
temporal variations in the proportion of area
under MVs are also higher. The data for Itgaon
indicate that, in years with low rainfall during
the planting period ( 1995 and 1996) when the
overall rice area was reduced, area under MVs
decreased more than proportionately (Table 4).
The share of traditional varieties (TVs) in rice
area planted thus increased. When rice area
expanded in 1997, the area under MVs increased
more than proportionately. Thus, an important
coping mechanism appears to be reliance on
TVs in drought years. By switching to TVs,
farmers may be able to cushion the effect of
early-season drought to a certain extent.
Another coping mechanism is increasing the
area under short-duration varieties in years with
poor rainfall to partially compensate for late
crop establishment. If this is the case, the
proportion of area under short-duration varieties
should be higher in 1995 and 1996 than in 1994
and 1997. The data show that this is only true in
Itgaon (Table 5). This potential risk-coping
mechanism thus appears to be unimportant in
Mungeshpur. Overall, farmers probably rely
more on adjusting crop establishment method to
deal with early-season drought than on
manipulating varietal duration.
There is also an interactive effect between
variety and crop establishment method. In
response to early-season drought, farmers not
only increase the area under TVs but they also
establish a greater proportion by direct seeding.
For direct-seeding culture, farmers prefer shorter
duration varieties (Table 12). In Itgaon, the
proportion of short-duration varieties increased
in 1995 and 1996 compared with 1994,
indicating that an adjustment in phenology could
be an important mechanism for direct-seeded
rice. For transplanted rice, the pattern of
adjustment is not very clear.
Total household income
Changes in the proportion of income in Itgaon
over the 5 years indicate that a decline in rice
income in 1995 and 1996 relative to that in 1994
has been more than offset by an increase in
income from wheat and other crops (Table 9). In
fact, income from wheat increased over time
because of expansion in area in both villages.
Income from other crops appears to be
negatively correlated with income from rice.
Farmers may be dealing with the shortfall in rice
production by expanding the area under other
crops. As mentioned earlier, the area under
maize, pulses, and other nonrice crops increased
significantly in Itgaon in response to the 1995
drought.

129
 Despite the shortfall in rice production in Characterization of these traditional varieties
1995, total household income has remained and identification of traits that impart adaptation
similar over the 5 years in each village. This to early-season drought would be important
indicates the ability of the households to initial steps.
efficiently cope with the risk associated with rice The average level of income is positively
production. As rice contributes to only a small correlated with farm size but, for a given size
proportion of total income, variability in rice class, income levels are similar across the two
income does not affect variability of total villages (Table 13). The relative share of rice in
income appreciably. total income increases with farm size and is
substantially higher for all size classes in
Farm size and production system Mungeshpur than in Itgaon. Even though large
farmers have proportionately less area under rice
We examine the effect of farm size (or wealth than small farmers, their share of rice income is
status) in terms of three variables-landuse higher due to the larger absolute area under rice
pattern, extent of adoption of MVs, and income. as well as to the greater adoption of MVs. The
These indicators are expected to partially share of nonfarm income in total income also
capture the effects of risk that may differ by decreases with an increase in farm size,
wealth status. indicating that small farmers depend more on
In terms of cropping pattern, the major nonfarm income.
difference was that the proportionate area under
rice decreased and that under fallow increased as
farm size increased. Thus, judging by the area Table 13. Percentage share of different sources of income
in total household income, 1994-98.
planted, the importance of rice to smaller
farmers is greater. Areas under other crops were Item Mungeshpur ltgaon Both villages
more or less similar. The responses to drought in Small farms
1995 and 1996 were comparable in that farmers Income household-1
(000 Rs) 13.0 11.1 12.4
in all categories reduced their rice area and % Share
increased their fallow area by approximately the Rice 13 6 11
same proportion. Rabi cropsa 23 19 22
Nonfarm 50 65 54
A major difference was found in terms of the Others 14 9 13
extent of adoption of MVs. The area under MVs Medium farms
Income household-1
increased with farm size (Table 4). Large (000 Rs) 26.0 22.1 23.8
farmers in Mungeshpur planted MVs only. The % Share
Rice 17 3 10
differences in adoption rate for MVs, by farm Rabi cropsa 37 27 32
size category, are clearer in Itgaon where large Nonfarm 28 63 46
Othersb 19 7 12
farmers had almost double the proportionate Large farms
area under MVs compared with small farmers. Income household-1
(000 Rs) 36.1 34.5 34.7
In terms of temporal variations, large farmers
% Share
maintained the proportionate area under MVs Rice 22 6 8
and TVs throughout the 5 years. Small farmers, Rabi cropsa 37 35 35
Nonfarm 13 43 39
on the other hand, shifted from MVs to TVs in Othersb 28 16 18
response to drought conditions in 1995 and All farms
Income household-1
1996. In 1997, they expanded the area under (000 Rs) 17.4 22.9 20.2
MVs in response to favorable rainfall. The % Share
Rice 15 5 9
reliance of small farmers on TVs for risk Rabi cropsa 30 30 30
reduction is thus greater. Such a behavior Nonfarm 37 52 46
Othersb 17 13 15
probably reflects strategies that medium farmers
use to protect themselves against risk, which a Rabi crops are mostly wheat intercropped with mustard. b Includes
income from other kharif and summer crops, income from livestock,
will thus have positive welfare effects. and income as a farm laborer.

130

Risk benefit and rice research
What opportunities exist for rice research to
reduce fluctuations in income and consumption
of farmers? What is the size of the economic
benefit if rice yield and production could be
stabilized? Answers to these questions are
critical for designing suitable technological and
policy interventions to reduce the ‘cost’ of risk.
Before proceeding further, it is essential to
define what we mean by cost of risk and to
develop a device to measure it quantitatively.
For this, we use the expected utility model of
decision-making. The model postulates that,
under risky situations, decision makers evaluate
decisions in terms of expected utility of income
and choose the decision that maximizes the
expected utility. For risk-neutral decision
makers, the decision that maximizes the
expected utility is also the decision that
maximizes the expected income gain. A risk-
averse decision maker, on the other hand, would
be willing to sacrifice some income to avoid
taking risk. The cost of risk is the amount of
income sacrificed to protect or insure against
risk. Using the expected utility theory, the cost
of risk can be approximated as (Pandey et al
1999)
D = 0.5 R [a2Cr2 + 2 a (1 -a) g CrCy] (2)
where D is the cost of risk (or risk deduction)
expressed as a proportion of mean income, R is
the coefficient of relative risk aversion, -Cr is the
coefficient of variation (CV) of rice income, a is
the share of rice income in total income, Cy is
the CV of nonrice income, and g is the
correlation coefficient between rice and nonrice
income. The proportional risk premium
measured in equation 2 provides an estimate of
the cost of risk currently borne by farmers
relative to the situation in which the variability
of rice income is completely eliminated. As
there will always be some variability of rice
income that cannot be eliminated, the estimate
obtained from equation 2 can be considered an
upper-bound value.
For simplicity, let us assume that the
correlation between rice and nonrice income is
Table 14. Cost of instability in rice income.
Item Mungeshpur ltgaon
CV of rice income (%) 30 76
CV of nonrice income (%) 15 15
Ratio of rice income to total
income (%) 15 5
Av cost of risk (% of mean income)
if correlation between rice and
nonrice income = 0 0.3 0.1
if correlation between rice and
nonrice income = 0.2 0.4 0.3
close to zero. If the applicable value of the
coefficient of relative risk aversion is 2, the cost
of risk will be
D = a 2 [Cr]2 (3)
Thus, the cost of risk is directly proportional
to the CV of rice income and the share of rice
income in total income. The average costs of
risk in rice income are low for both villages
(Table 14). Although the CV of rice income for
Itgaon is as high as 76%, a low ratio of rice
income to nonrice income has made the cost of
risk low. This basically means that in farming
communities where income diversification has
reduced the importance of rice as a source of
income, the economic cost of variability in rice
income will be low. It is the variability of total
income, not that of rice income alone, that is of
concern to farmers. The benefit of stabilizing
rice income thus decreases as the contribution of
rice to total income shrinks.
A major factor determining the cost of risk is
the ratio of rice income to total income. To
illustrate the effect of this ratio, we recalculated
the cost of risk in both villages by varying this
ratio from close to zero to 0.5 but assuming the
CV of rice income to remain constant as in Table
14. The results indicate that the cost of risk in
Itgaon increases rapidly with the increase in the
share of rice income (Fig. 6). By keeping the
share of rice income in total income low, farmers
in Itgaon thus seem to have been able to avoid
the cost of risk.
The above estimates of the cost of risk were
obtained assuming that rice and nonrice incomes
have a zero correlation. If fluctuations in rice
income are independent of fluctuations in
131
Fig. 6. Relationship between the risk premium and share of rice in total income.
nonrice income, the latter will not contribute to
the income risk of rice. Although the share of
rice is small in both villages, the correlation
coefficient is likely to be positive. If the
correlation coefficient is 0.2, the risk increases
by about 0.2 percentage points. This additional
cost of risk cannot be reduced by lowering the
instability in rice income but will require ways
of making the level of nonrice income less
dependent on rice income. Diversification of the
income base away from rice can result in such
an outcome. Policies such as increased
investment in rural education and improvements
in rural infrastructure promote such
diversification and thereby help reduce the cost
of variability in rice income. Such policies can
also simultaneously result in efficiency gains.
The above picture indicates that risk benefits
derived from stabilizing rice income are fairly
small. This does not, however, mean that
investment in technology development for risk
reduction has a low return. The total benefit of
an intervention can be viewed as the sum of the
gain in mean income and the value of reduction
in risk. Even if the latter benefit is small, the
efficiency gains resulting from an improvement
in rice productivity are likely to be large enough
to justify such investments. In addition,
improvements in rice productivity could be an
effective strategy for inducing income
diversification and overall rural economic
growth.
132
Concluding remarks
To manage risk in rice production, farmers use a
range of methods such as altering the proportion
of rice area, adjusting the area under traditional
varieties, growing several rice varieties, and
changing the rice establishment method. Some
of these responses are seasonal, whereas others
are more permanent and have been incorporated
into the nature of rice production systems. In
addition to these adjustments, crop and income
diversifications are features that have helped
reduce the overall risk in income. These risk-
coping mechanisms are based on the strategy of
diversification and maintenance of flexibility.
Researchers and policymakers need to be
cognizant of these risk-coping mechanisms so
that interventions that complement these
mechanisms can be developed.
A lot of research effort has been made to
improve yield stability of rice through breeding
and agronomic manipulations. Although yield
stabilization is an important research objective.
our data indicate that variability in rice area is
often higher than variability in yield. When
initial rains are delayed, farmers fail to plant rice
and divert the land to other crops or simply
fallow it. Technologies that permit late
establishment of rice are needed to reduce
variability in rice area. To the extent that such
technologies are also capable of stabilizing
yield, the overall variability in rice production
 could be substantially reduced. Although we
analyzed the situation where rice planting was
not possible due to early-season drought,
submergence can similarly create wide
fluctuations in rice area. Stabilization of rice
area should be an important objective of
technical research in rainfed systems.
Another finding of the study is that farmers
rely more on TVs in unfavorable planting
seasons to reduce yield losses. These varieties
are presumably better adapted to abiotic stresses,
especially during planting time. Identifying and
incorporating such adaptive traits in varietal
improvement programs could help reduce losses
under adverse conditions.
Overall, rainfed rice farmers of eastern Uttar
Pradesh appear to be reasonably risk-efficient in
the sense of being able to maintain total income,
even in the face of a sharp decline in rice
income. Even though variations in rice yield, net
returns from rice per unit area, and rice income
per household are high, the overall economic
cost of variability in rice income is low due to a
small share of rice in total income. Farmers are
apparently able to meet deficits in rice
production by allocating their resources to
alternative activities. The existence of these
relatively low-cost coping mechanisms does not
mean, however, that research to reduce the
probability of low yields should not be
undertaken. Even though risk benefits per se
may be small, the resulting gain in productivity
can benefit farmers by raising their average
incomes.
Although methods and tools for
microeconomic analysis of risk are generally
available, the lack of temporal farm-level data
covering a sufficient number of periods remains
a problem for the analyst. While an ingenious
use of cross-sectional data and weather-driven
crop growth models can help shed some light on
the nature of risk, temporal data are essential for
conducting a more complete analysis at the
farm-household level. Collection of such data
should be a part of the research program of risk
analysis.
References
Judge GG, Griffiths WE, Hill CR, Lutkepohl H,
Lee T-C. 1985. The theory and practice of
econometrics. New York (USA): John Wiley
and Sons.
Pandey S, Singh HN, Villano RA. 1999. Rainfed
rice and risk-coping strategies: some micro-
economic evidences from eastern India.
Selected paper at the Annual Meeting of the
American Agricultural Economics
Association, 8-11 August 1999, Nashville,
Tennessee, USA.
Smale M, Just RE, Leathers CV. 1994. Land
allocation in HYV adoption models: an
investigation of alternative explanations.
Am. J. Agric. Econ. 76:533-546.
Talawar S. 1996. Local soil classification and
management practices: a bibliographic
review. Research Paper 2. Laboratory of
Agricultural and Natural Resource
Anthropology, Department of Anthropology,
University of Georgia, Athens, Georgia,
USA.
Walker TS, Jodha NS. 1986. How small farm
households adapt to risk. In: Hazell PBR,
Pomareda C, Valdes A, editors. Crop
insurance for technology development:
issues and experiences. Baltimore, Md.
(USA): Johns Hopkins University Press. p
17-34.
Discussion
Question: How the implications of this study
will be useful when rice accounts
for only a small proportion of the
total income of sample farmers.
Answer: The share of rice in the total income
is small, but rice is still the
dominant crop in the kharif season
and many people are involved in
rice production activities. An
increase in the productivity of rice
can improve food security,
especially of the poorer groups.
While the effect of risk to individual
farmers may be small, a substantial
drop in rice yield over a large area is
133
 likely to reduce labor employment
in farm and other sectors that are
dependent on farm production.
Thus the finding of the study that
risk-efficient technologies are
needed is still valid. The results,
however, imply that the demand for
crop insurance for rice may be low
in these areas as farmers are willing
to pay only a small proportion of
income to purchase insurance that
stabilizes rice income at the current
mean level.
Question: Some differences in the two samples
like size of holding and land types
might have influenced the results. It
would be better to make the samples
homogeneous and take out the effect
of these factors. As regards the share
of rice in total income, I feel it
should be higher if you consider net
income. This is because the cost is
much higher for cash crops like
sugarcane.
Answer: Yes, there are differences in size of
holdings and number of parcels per
holding between the two villages.
We have tried to control for these
differences by conducting separate
analysis by farm-size categories.
For the temporal analysis, the
comparison is not across villages
but over time for each village.
Question: If the major share is coming from
non-farm income, why should
farmers bother about risk in rice and
therefore, crop management
practices may not be really seen in
the context of risk management.
Answer: Yes, opportunities for income gains
through agronomic management
that reduce fluctuations in rice yield
may not be so important in this
situation. The current structure of
household income has evolved over
a period of time in such a way that
non-farm income is contributing
maximum to the total household
income. This evolution itself may
134
be a response to risk as
diversification out of rice may have
helped reduce the overall risk. The
majority of income now is coming
from rabi crops and non-farm
employment. The availability of
irrigation and proximity to urban
centers may have facilitated such
diversification in these villages.
However, environmental conditions
and accessibility in other areas may
constrain such diversification out of
rice. Risk management strategies
may be more important in those
areas. We have started similar
studies in other locations so that
some generalizations can be made.
Notes
Authors’ addresses: S. Pandey and R. Villano,
International Rice Research Institute, Los
Baños, Philippines; H.N. Singh, Narendra
Deva University of Agricultural Technology,
Faizabad, India.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAPDRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
Risk and the value of rainfall forecast for rainfed
rice in the Philippines
Abedullah and S. Pandey

The value of a rainfall forecast for rainfed rice production in the Philippines is estimated under
the assumption that farmers adjust the quantities of fertilizer and labor if rainfall forecasts are
available. Using a panel data of 46 rice farmers in Tarlac, Philippines, a heteroscedastic
production function with growing-season rainfall (July to October) as one of the independent
variables is estimated. The value of a perfect predictor of rainfall is subsequently estimated
for risk-neutral and risk-averse farmers. The effect of risk aversion on the value of rainfall
forecast was found to be minimal. The expected value of the rainfall forecast was higher
when farmers were assumed to be adjusting labor only than when farmers were assumed to
adjust fertilizer only. The expected value of the rainfall forecast under the assumption of
simultaneous adjustment of fertilizer and labor was estimated to be slightly more than 1% of
the net return from rice production. Taking the rainfed rice area in the Philippines of 1.2 million
ha and a net return of $446 ha-1, the total value of the forecast is estimated to be $6.6 million
per year. The expected value was also estimated under the assumption that, instead of a
forecast of rainfall amount for each year, forecasts made were for rainfall “above average,”
“average,” or “below average.” The value of rainfall forecast was the highest and ranged
between 1.4% and 4.5% of the net return when the forecast was “above average.”This
implies that investment by the Philippines weather bureau to predict an above average
rainfall situation will be more valuable to Filipino rice farmers than predicting other rainfall
categories.

Agriculture is risky because various kinds of Administration (PAGASA) provides seasonal

risks are involved in the production and
marketing of agricultural products (Anderson
and Dillon 1992). Since risk arises out of the
uncertainty about variables that affect
production and profits, a reliable prediction of
these uncertain variables will reduce risk. When
information about uncertain variables is
available, input use and productivity are likely to
be different compared with a situation when no
such information is available.
Although risk emanates from several
sources, climatic uncertainty is the dominant
source of risk, especially under rainfed
conditions. Rainfall forecasts can partially help
resolve uncertainties in rice production. In the
Philippines, the Philippine Atmospheric,
Geophysical and Astronomical Services
rainfall forecasts that are classified as “above
average,” “below average,” or “average.”
Although these forecasts are provided to help
improve farmers’ decisions regarding rice
production, it is uncertain how valuable these
forecasts are to rice farmers in economic terms.
Allocation of more resources for forecasting of
rainfall is desirable if the additional value of the
rainfall forecast is higher than the additional cost
of providing such a forecast. Estimates of the
value of the rainfall forecast can be a useful
guide in determining the optimal resource
allocation for generating forecasts. To aid in this
task, this study estimated the potential value of
rainfall forecast to rice farmers of Tarlac, Central
Luzon, Philippines.

135
A conceptual model for estimating
the value of information
The value of information can be derived using
the standard model of agricultural risk analysis
(Anderson et al 1977). Let f be the stochastic
variable (i.e., state of nature) beyond the control
of the decision-maker. If X is a vector of
variable inputs that are manipulated by the
decision-maker, the return g( f ,X) earned
depends on the state of nature and the vector of
inputs. The function g( f ,X) embodies input,
output, and price relationships. In the absence of
forecast information, decisions are based on the
prior belief about the probability distribution of
the stochastic variable. Let this prior probability
density function be denoted by f (X). A risk-
neutral decision-maker selects % to maximize
the expected return òg(f ,X)f (X)dX from the
production process. The optimal decision and
profits based on prior information only are the
prior optimal level of inputs and the prior
optimal profits, respectively. On the other hand,
if the economic agent has a forecast of the value
of f (i.e., about the state of nature) before the
selection of the input vector, the decision-maker
will select X to maximize g( f ,X) for each X.
Let the maximized value of the profit be
represented by g(f ,X). The expected value of
information “V” for risk-neutral farmers is the
difference between expected profit derived with
and without the information and is obtained as
(1)
where V stands for the value of information to
risk-neutral farmers and h(f ) is the probability
density of an uncertain event revised using the
forecast information.
Following the expected utility model of
decision-making under risk, risk-averse farmers
are assumed to maximize the expected utility of
profit (Anderson et al 1977). Analogous to the
model above for risk-neutral farmers, expected
utility is estimated “with” and “without”
information and the difference in the expected
utility can be regarded as an indicator of the
expected value (in utility terms) of a rainfall
predictor to risk-averse farmers. As the
differences in utility, which are ordinal in scale,
136
are meaningless, we have used the method
followed by Byerlee and Anderson (1982) to
obtain the value of information in money terms:
(2)
where E[U(p* ) is the expected utility of the prior
optimal act and E[U(p - ] is the expected
utility of the optimal act derived using the
prediction that costs $v to acquire.
To implement model 1, it is essential to
quantify the effect of inputs (X) and stochastic
variables (f ) on agricultural output. Such a
relationship can be quantified using a production
function. To implement model 2, the utility
function that relates the level of profit to utility
is also needed. A convenient form of the utility
function is the constant partial risk-averse
function (CPRA). It is specified as
(3)
where S is the risk aversion coefficient. This
form of utility function has been widely used in
applied research (Sillers 1980, Smith and Umali
1985, Rosegrant and Roumasset 1985).
Description of study area
Socioeconomic monitoring of rice production
practices of 46 farmers from the municipality of
Victoria, Tarlac, Philippines, began in 1990.
Rice is grown in the rainy season with most of
the land being left fallow in the dry season. The
area has good market access and is well linked
with the town economy of Tarlac. Farmers are
engaged in various off-farm and nonfarm
activities during the dry season to supplement
their incomes. Table 1 shows the means and
coefficients of variation (CVs) of output and
input variables. Based on the long-term weather
record (1976-93, the mean annual rainfall in
Victoria is 1,649 mm. Figure 1 shows the
variation in rainfall during the rice-growing
season (July-October). Plot-level data from the
sample of 46 farmers were collected for the
period 1990-95. All inputs and output were
recorded in a survey questionnaire, which was
administered every year to the same group of
farmers. Unbroken panel data for 420 plots for
each of the six years were used to estimate the
production function. The only source of
uncertainty considered was rainfall, which was
specified in the model as the total rainfall during
the rice-growing season. For biological reasons,
it would have been more appropriate to specify
rainfall as a weekly or monthly total compared
with a seasonal total. However, we used the
seasonal total because a reliable estimation of
the production responses for weekly or monthly
rainfall using production data for only six years
Table 1. Means of per hectare input and output use in
Victoria, Tarlac, Philippines.
Input/output Mean
would have been constrained by the limited
degrees of freedom.
Production function estimation
When production functions are estimated using a
combination of cross-sectional and time-series
data, heteroscedasticity may lead to
asymptotically inefficient parameter estimates
(Just and Pope 1978). The Breusch-Pagan test
rejected the null hypothesis of homoscedasticity
at the 5% level. To correct for heteroscedasticity,
a multistage production function estimation
technique suggested by Antle (1983) was used.
A quadratic production function as specified in
Standard CV a (%) 1 2
deviation equation 4 was used.

Total labor b (d ha-1) 55 15 27

Seed (kg ha-1) 110 47 43
Fertilizer (NPK) (kg ha-1) 94 42 45 (4)
Herbicide (kg ai ha-1) 0.14 0.21 150
Pesticide (kg ai ha-1) 0.09 0.14 155
Yield (t ha-1) 3.35 1.07 32 where Y, X1, X2, and Z represent yield, total
b
labor, fertilizer (total of N, P, and K), and total
a CV = coefficient of variation. lnciudes family labor and hired labor.

137
Table 2. Quadratic production function estimates
Antle s technique in Victoria, Tarlac, Philippines.a
Explanatory Coefficients
variables
Intercept -72.9E-03ns
Labor 30.2E-03*
Fertilizer 18.2E-03***
Rain 1.4E-03ns
Labor2 -0.2E-03***
-3.8E-05***
Fertilizer2
Rain2 -1.1E-06**
-0.2E-03***
Labor x rain 1.7E-05*
Fertilizer x rain 5.1E-06**
R2 0.25
n 420
... = significant at 1%, ** = significant at 5%. * = significant at 10%, ns
a
= not significant.
rainfall during the rice production period (from
July to October), respectively. The stochastic
error term is represented by µ. Table 1 shows the
per hectare input use (labor, seed, herbicide,
pesticide, and active ingredients of fertilizer i.e.,
sum of N, P, and K) and output with descriptive
statistics.
Table 2 presents the parameter estimates
using Antle’s method. The coefficients of labor,
labor’, fertilizer, fertilizer’, rain, and rain2 all
have the expected signs. The joint effects of rain
and labor and those of rain and fertilizer are
positive and significant. The interaction term
between fertilizer and labor is negative,
indicating that these two inputs have a substitute
relationship in rice production.
Procedure for estimating the value of
rainfall forecast
In valuing the forecasts, the prior probability
distribution of rainfall is required. We assumed
the farmers’ estimates of the probability of
rainfall to be equivalent to the historical
distribution of total rainfall during the rice
production period. The probability distribution
was estimated by applying the sparse data rule
(Anderson et al 1977) to the historical rainfall
for the period 1977-95. For a given value of the
decision variable, profits were generated for
each year by substituting the rainfall for that
particular year into the production function. The
expected profit was then calculated by using the
corresponding rainfall probability weights. This
138
with process was repeated for all possible values of
the decision variable and the value of the
Standard decision variable that generated the maximum
errors
expected profit was taken as the prior optimal
134.1E-02 decision. For risk-averse farmers, the prior
18.2E-03
7.6E-03
maximal expected utility was similarly
1.6E-03 calculated by substituting the profit for each
9.1E-05
decision in equation 3 and using the
1.7E-05
5.6E-07 corresponding probability weights. Sillers
7.1E-05 (1980) concluded that 78% of rice farmers in
1 E-05
4.4E-07 Nueva Ecija, Philippines, belong to the two
intermediate categories of risk aversion. The
common endpoint of these two categories is S =
0.8. The value of the risk aversion coefficient
used in this study was 0.8. The rainfall forecast
was generated by random sampling from the
discrete probability distribution of the historical
rainfall data. Assuming that the prediction is
perfect, optimal profit for this forecast was then
obtained using the estimated production
function. As prediction is assumed to be perfect,
the probability distribution of the forecast is also
the historical probability distribution of rainfall.
Using the historical distribution, the expected
profit when a perfect predictor of rainfall was
available was then calculated. The difference
between this expected profit and the expected
profit of the prior optimal act is the expected
value of the perfect predictor of rainfall. A
similar procedure was used for the risk-averse
case and equation 2 was used to obtain the value
of a perfect predictor to a risk-averse farmer.
Estimation of the value of the perfect predictor
is convenient as it avoids the need to explicitly
obtain the likelihood function, which is an
indicator of the accuracy of the predictor. Since
no rainfall predictor can be perfect, the
estimated value of the predictor can be
considered as the upper limit of the value of
rainfall forecast.
As rainfall forecasts in the Philippines are
provided as “average,” “below average,“ or
“ above average,” we also estimated the value of
these forecasts. The 19-year historical July-
October total rainfall fluctuated between 700
and 1,650 mm (IRRI various years). We divided
this total range of rainfall into three categories-
”below average” (between 700 and 1.000 mm of
rainfall), “average” (between 1,050 and 1,300
mm), and “above average” (between 1,350 and
 1,650 mm). To calculate the value of the perfect
predictor, predicted rainfall values were limited
within the range defined by these prediction
categories. The prior optimal expected profit
was obtained as before. The posterior expected
profit was estimated by using the optimal profits
for each perfect prediction (randomly selected,
within the particular rainfall category) and the
corresponding conditional probabilities. The
difference between these two expected profits is
the value of a particular category of forecast for
a risk-neutral farmer. A similar procedure was
used for the risk-averse farmer.
Labor and fertilizer are the two decision
variables considered. Farmers may adjust either
or both of them from their prior optimal values if
rainfall forecasts are available. We estimated the
value of the rainfall forecast under the
assumptions that (1) only labor is adjusted to its
posterior optimal value while fertilizer is fixed at
its sample average, (2) only fertilizer is adjusted
to the posterior optimal value while labor is kept
fixed at its sample average, and (3) both labor
and fertilizer are adjusted simultaneously to their
posterior optimal values.
Value of rainfall forecast
Table 3 presents the estimated values of a
perfect rainfail predictor for risk-neutral and
risk-averse farmers. The expected value of the
rainfall forecast, if farmers are assumed to adjust
fertilizer application when rainfall predictions
are available, is $1.92 and $2 ha-1 for risk-
neutral and risk-averse farmers, respectively.
These values account for 0.43% and 0.46% of
Table 3. Total expected value of forecast ($ ha-1) under
different input adjustments in Victoria, Tarlac, Philippines.
Value of rainfall forecast”
Item
Risk-neutral Risk-averse
Fertilizer adjustment only 1.92
(0.43)
Labor adjustment only 4.08
(0.92)
Simultaneous adjustment 5.50
of fertilizer and labor (1.23)
Value in parentheses represents percentage of net return.
the net return from rice production in the study
are a.
The expected value of the rainfall forecast
under the assumption that only labor is adjusted
is $4.08 and $4.29 ha-1 for risk-neutral and risk-
averse farmers, respectively. These account for
0.92% and 0.96%, respectively, of the net return
from rice production. The expected values of a
perfect predictor of rainfall (under the
assumption that farmers adjust fertilizer and
labor simultaneously) for risk-neutral and risk-
averse farmers are $5.50 and $5.79 ha-1,
respectively. In terms of percentage of net
return, these values are 1.23% and 1.29%,
respectively. The effect of risk aversion on the
value of the rainfall forecast was minimal.
The cost of acquiring information was not
included in the above calculation, implying that
the results indicate the expected gross benefits of
the forecast. Net benefits depend on the cost of
obtaining and using information. Gross benefits,
as estimated here, are useful to indicate the
maximum amount a farmer would be willing to
pay to obtain the forecast.
The expected values of the forecast under
the assumption that forecasts are “below
average,” “average,” or “above average”
(according to categories) were also estimated
(Table 4). In the case of simultaneous
adjustment of fertilizer and labor, values vary
from $1.58 to $20 ha-1 depending on the type of
the forecast and the assumption about risk
attitude of the farmers. In terms of percentage of
net return, these values range from 0.35% to
4.52%. The “above average” forecasts are
seemingly more valuable to farmers than “below
average” and “average” forecasts. PAGASA
could help farmers more by investing more of its
resources in accurate predictions of above
average rainfall events.
The estimates of the value of the rainfall
forecast obtained here are only a small fraction
2.04 of the net return. In rainfed agriculture where
(0.45)
rainfall is the major source of uncertainty, such a
4.29 low value may appear to be somewhat
(0.96)
surprising. This may be partly the result of the
5.79 model specification in which rainfall is included
(1.29) as the seasonal total and the only two decision
variables considered are labor and fertilizer
139
Table 4. Expected value of different rainfall forecasts for
rice production period ($ ha-1) under different input
Concluding remarks
adjustments in Victoria, Tarlac, Philippines.
Overall, the expected value of a hypothetical
Forecast and Value of rainfall forecast a

adjustment of inputs perfect predictor of rainfall is between $2 and

Risk-neutral Risk-averse $6 ha-1 for moderate risk-averse farmers, which
Below average (700-1,000 mm) 1.42 1.50
is a little higher than the 1% of the net return
Fertilizer adjustment only (0.32) (0.34) earned by farmers from rice production in the
2.71
study area. This is an upper-bound estimate of
Labor adjustment only 2.92
(0.61) (0.65) the value of the rainfall predictor as the
prediction accuracy of a realistic predictor is
Simultaneous adjustment 3.42 3.67
of fertilizer and labor (0.77) (0.82) likely to be less than 100%. As rainfall
prediction in the Philippines is provided cost-
Average(1,050-1300 mm) 0.50 0.58
Fertilizer adjustment only (0.11) (0.13) free, this is also an estimate of its net value to
farmers. The effect of risk aversion on the value
Labor adjustment only 1.25 1.33
(0.28) (0.30)
of the forecast was minimal. Our results also
indicate that the value of information is
Simultaneous adjustment 1.58 1.71 asymmetrical, with the “above average” forecast
of fertilizer and labor (0.35) (0.38)
being four times more valuable than the
Above average (1,350-1.650 mm) 6.1 7 6.50 “average” forecast and about two times more
Fertilizer adjustment only (1.38) (1.46)
valuable than the “below average” forecast. An
Labor adjustment only 13.75 14.17 important implication of this finding is that
(3.08) (3.18)
additional effort by PAGASA to predict “above
Simultaneous adjustment 19.33 20.17 average” rainfall events may be justifiable.
of fertilizer and labor (4.33) (4.52)
Overall, the average value of a perfect predictor
a Value in parentheses represents percentage of net return. of seasonal rainfall to rainfed rice farmers of the
Philippines was estimated to be $6.6 million per
year.
application. Nevertheless, estimates derived here The value of the forecast depends critically
are comparable with those obtained for other on its quality and timeliness (Mjelde et al 1988).
countries. Mjelde et al (1988) reported the value Forecasts are valuable only if they are received
of rainfall forecast varying from 5% to 13% of before inputs have been applied. We did not
the net return in maize production in Illinois investigate timeliness because of limitations of
(USA). Pannell (1994) estimated the value of data for estimating production functions that
information from herbicide decision making in adequately capture temporal interactions
wheat production in Australia to be between 0 between managed inputs and rainfall. Similarly,
and 15% of the gross margin from the crop. we have considered rainfall as the only source of
Marshall et al (1996) estimated the value of the uncertainty on the assumption that rainfall
seasonal forecast for dryland wheat production variability is the major source of risk in rainfed
in Australia to be between 0 and 6% of the net rice production. Further expansion of the
return. Even though the value of the forecast approach used to include these refinements is
expressed as a percentage of net return may be suggested.
small, the total absolute value can be quite large,
depending on the size of the area covered by the References
forecast. Taking the rainfed rice area in the
Philippines of 1.2 million ha and a net return of Abedullah. 1998. Risk, information, and
$446 ha-1 (Abedullah 1998), the total benefit to fertilizer use in rainfed lowland rice areas of
rainfed rice farmers would be $6.6 million y-l Tarlac, Philippines. Unpublished PhD
even if the value of the forecast is 1.23% of the dissertation, Graduate School, University of
net return. the Philippines Los Baños.

140
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Discussion
Question: What is the nature of forecast -
monthly or daily rainfall?
Answer: It is a seasonal rainfall forecast in
terms of average, above average or
below average.
Question: How will the value of rainfall
forecast change if forecast is
inaccurate? Also, have you
discounted the value or benefits on
account of farmers’ risk adjustment
behavior and changes in input use
in the absence of rainfall forecast?
Answer: We have estimated the value of
forecast assuming that all forecasts
were correct and there are two
inputs, viz. labor and fertilizer,
which can be adjusted depending
on the forecast. As real world
forecasts are never perfect, the
estimates provides an upper bound
value of forecast. Yes, the farmers’
responses you mention are built
into the model through the use of a
production function and optimizing
conditions.
Question: Is this value of 13 per cent a large
number in comparison to the value
of other information like variety
selection and fertilizer application.
Answer: We have applied this model to
rainfall forecast only. The model
can be potentially applied to other
kinds of forecasts also such as pest
attack. Fertilizer application
depends upon moisture conditions
and this effect has been captured in
the production function. If farmers
have better scientific advice on
fertilizer management, the value of
forecast may go up.
141
Notes

Authors’ addresses: Abedullah and S. Pandey,

International Rice Research Institute, MCPO
Box 3 127, Makati City 1271, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

142
Characterizing risk and strategies for managing risk
in flood-prone rice cultivation in Assam
B.C. Bhowmick, S. Pandey, R.A. Villano, and J.K. Gogoi

High risk of flood and low yields characterize the rice production systems in Assam. This
paper analyses the changes in rice productivity and variability over the period 1971-97 using
district level data. In addition, some farm-level data are used to highlight the differential
effects of risk on the adoption of modern varieties and features of rice production systems.
The analysis of instability in rice production using district-level data indicated that modest
production growth has not led to an increase in production instability in Assam. Despite the
increase in production variance, coefficients of variation of area, yield and production did not
record any significant changes. The farm-level data showed that the share of rice income in
the total household income in Assam is relatively higher than in other states of eastern India.
The economic benefits from yield stabilization are therefore likely to be substantial in Assam.

Eastern India, which comprises Assam, West
Bengal, Orissa, Bihar, eastern Uttar Pradesh, and
eastern Madhya Pradesh is predominantly a rice-
growing region. Rice in eastern India is grown
mainly under rainfed conditions. In spite the
importance of rice in the economy of Assam,
rice productivity here is the lowest of all eastern
Indian states. Rice production heavily depends
on the monsoon rains that cause severe flooding
and submergence. The high level of climatic risk
is a major factor constraining the adoption of
improved technologies in this state.
Most past studies on eastern India excluded
Assam from their analyses because of data
accessibility problems in this somewhat remote
and politically sensitive state. The major
objective of this paper is to analyze the changes
in rice productivity and variability over the
period 197 1-97 using district-level data.
Attempts are also made to explain the
differences in the variability of rice area, yield,
and production across districts. In addition,
some farm-level evidence on the possible effects
of differential levels of risk on the characteristics
of rice production systems is investigated. Under
risky situations, the main objective of farmers
may not be to maximize crop productivity but to
assure survival. Over time, farmers develop
strategies to ensure survival when faced with
such risky situations. Such strategies can be
classified as ex ante or ex post depending on
whether they reduce risk or help cope with the
situation when losses do occur. A good
understanding of such strategies can be helpful
in developing interventions that complement
farmers’ strategies. A brief discussion of
strategies used by Assam rice farmers to cope
with risk is also provided.
Data and methods
The analysis of production variability in Assam
is based on district-level time series data (1971-
97) of the state. In as much as these data were
not easily available from the national statistical
agencies, some efforts were made to collect and
collate data from the state and district
authorities. Data have been grouped according to
the original districts. The coefficient of variation
(CV) of rice area, production, and yield was
computed after linearly detrending the time-
series data. Farm-level analysis was carried out
from primary data collected by the Department
of Agricultural Economics, Faculty of

143
 Agriculture, Assam Agricultural University, The average annual rainfall in the state is 2,586
Jorhat (Bhowmick 1992, Das 1995, Gogoi mm. About 60-70% of the total. rainfall is
1998). received within a span of 3-4 months (May to
To analyze the change in instability over August). Because of high rainfall, flooding is a
time, the variance decomposition analysis typical feature of agriculture in Assam. Flood
developed by Hazell (1982) was used. The time- damage is more intense on either side of the
series data were divided into two periods of rivers Brahmaputra and Barak and their
equal length-1971-1982and 1983-19941. The tributaries. Between 1957 and 1996, flood
data on area and yield for each period were affected an average of 236,000 ha of cropped
linearly detrended and the detrended data were area (Table 2). In heavily flooded years, such as
centered on the respective means. Detrended 1988, more than 1 million ha of cropped area
yield and detrended area were multiplied to were affected. The occurrence of multiple waves
obtain detrended data on production. These of flood during the monsoon period extensively
detrended data were used for the variance damages crops. The number of people affected
decomposition analysis. by flood and the amount of damage have
The three zones with highest number of increased steadily over time.
flood-affected areas were considered for the Based on the incidence and extent of flood,
microlevel analysis. The zones selected were the state is categorized into two broad areas:
North Bank Plains Zone (NBPZ), Lower chronically flood-prone area and occasionally
Brahmaputra Valley Zone (LBVZ), and Upper flood-prone area (Table 3). Nearly 73% of the
Brahmaputra Valley Zone (UBVZ). The districts total flood-prone area is chronically flood-prone.
selected from these zones were Lakhimpur, The proportion of the flood-prone area is highest
Kamrup, and Sibsagar, respectively. More than in Lakhimpur at 63%. Among the agroclimatic
50% of the rice area in Lakhimpur is chronically zones, the NBPZ occupies 39% of the flood-
flood-prone, whereas a similar area in Kamrup prone area of the state. High variability of crop
and Sibsagar is about 10%. The production
environment in Sibsagar is more favorable, as
Table 1. Some basic features of agriculture of Assam.
indicated by its higher average yield and more
rapid expansion of summer rice. A total of 420 Features Year Particulars
households were surveyed and a brief analysis of Population density (persons km-1) 1991 286
farm-level data in terms of input use, yield, Average operational holding (ha) 1991 1.27
Average annual rainfall (mm) 1994 2,586
nature of tenancy, and the income structure is Cropping intensity (%) 1991 144
presented. Area under important crops (000 ha) 1997
Rice 2,526
Wheat 80
Major features of rice production Pulses 120
systems of Assam Oilseeds 320
Fiber crops 100
Yield of some important crops (t ha-1) 1997
Table 1 lists some of the important features of Rice" 2.03
Wheat 1.30
Assam. The mainstay of the economy is Pulses 0.55
agriculture, which accounts for about 40% of the Oilseeds 0.55
Fiber crops 0.89
state's domestic product (Phukan 1996). Assam
is divided into 6 agroclimatic zones, whose a Rice data are reported in terms of rough rice (conversion factor 1 kg
rough rice = 0.66 kg milled rice). Source: Directorate of Economics and
particulars appear in Appendix 1. Statistics (various years).

1For variance decomposition analysis, data for the recent years were not used. To make use of the data up until

1996, the data span could have been divided into 1971-83 and 1984-96. But for the sake of consistency of
analysis for other states (included in this volume), for which some of the more recent data were not available for
all districts, we decided to use the time segments 1971-82 and 1983-94 for all states.

144
Table 2. Cropped area and population affected by flood in (June–October). Ahu (autumn rice) is early rice
Assam (1957-96).
grown between February and June. Boro rice
Cropped Cropped Population Total (summer rice) is grown between November and
area area affected damages a
Year affected affected (000) (million Rs)
May. Autumn rice is grown as a normal ahu crop
by flood as % of under rainfed conditions and as an early ahu
(000 ha) total area
under irrigated conditions. With the expansion of
affected
irrigation, the early ahu has become popular in
1957-61 104 17 82 48 Cachar, Nagaon, Dibrugarh, Kamrup, and
1962-66 206 17 210 96
1967-71 122 26 109 71 Goalpara districts. The varieties used for early
1972-76 21 0 38 197 144 ahu are mostly improved. This rice type is
1977-81 226 29 251 221
1982-86 226 31 282 834 established in early February and harvested in
1987-91 1,060 29 1,107 3,797 late May. Because of its higher productivity,
1992-96 226 46 271 31 3
Average 236 28 248 438
there has been some shift in area from normal
ahu to early ahu in recent years. Flood generally
a
Value of crops, livestock and house and property. Source: Centre for
Science and Environment (1996).
affects ahu rice during the maturity stage and
sali rice during the early and late period of its
growth. Medium land and medium lowlands are
yields and low productivity are the characteristic the important land types where ahu and sali rice
features, especially in the chronically flood- are usually grown. As with ahu, boro rice in
prone areas (ICAR 1981). Assam is also of two types. Boro grown in low-
Assam is one of the important northeastern lying rainfed areas that contain enough soil
states of the country for rice cultivation, which moisture is known as “typical” boro. Boro rice
covers more than 63% of the gross cropped area grown under irrigated conditions is known as
in the state. Assam’s rice area for 1997 was 2.5 irrigated boro. While typical boro is limited to
million ha with an average productivity of 2.03 t some pockets, the area under irrigated boro has
ha-1.2 increased since 1980. Deepwater rice (buo) is
Basically three distinct types of rice are another type of rice grown in areas subject to
grown in the state. Of these, sali (winter rice) is deep inundation by floodwater. However, time-
the major rice grown during the kharif season series data on area, production, and yield of the

Table 3. Estimates of flood-prone areas of Assam.

Net sown areaa Chronically Occasionally Total Percent of

(000 ha) flood-prone flood-prone flood-prone flood-prone
Agroclimatic zone/district area area area area to total
1000 ha) 1000 ha) (000 ha) net sown area

North Bank Plains Zone

Lakhimpur 160 65 36 101 63
Darrang 310 28 4 32 10
Upper Brahmaputra Valley Zone
Dibrugarh 160 16 9 25 15
Sibsagar 320 29 7 36 11
Central Brahmaputra Valley Zone
Nagaon 295 16 8 24 8
Lower Brahmaputra Valley Zone
Kamrup 510 40 12 52 10
Goalpara 410 52 5 57 14
Barak Valley Zone
Cachar 247 4 10 14 5
All of Assam 2,412 248 90 338 14
a Av of data from 1968 to 1978. Source: Hydrogeology and Ground Water Resources Development (1980).

2
All production and yield data for rice are in terms of rough rice, not milled rice.

145
Table 4. Relative importance of various rice cultures in Assam.

Triennium average Overall

Item average
1971-73 1981-83 1991 -93 1995-97

Share of rice area (%)

Autumn 27 27 25 24 26
Winter 71 72 70 69 71
Summer 2 2 5 7 3
Share of production (%)
Autumn 19 18 17 16 18
Winter 78 80 76 75 78
Summer 3 2 7 8 4

Sources of data: Directorate of Agriculture (various years)

bao crop are not available as it is considered to
be a minor crop mostly confined to small
pockets of very low lying areas.
Results and discussion
State-level analysis
Winter rice is the major rice culture of Assam,
accounting for 71% of the rice area planted and
78% of the output (Table 4). Autumn and
summer rice account for 26% and 3% of the
total rice area, respectively. Over time, the share
of autumn rice has shown a slight decline in both
area and output. The share of summer rice has
increased, but its contribution to output even in
more recent years remains below 10%. The
average yields of autumn, winter, and summer
rice for the period 1971-97 are 1.17 t ha-1, 1.86 t
ha-1 and 2.25 t ha-1, respectively.
Figure 1 depicts trends in area, yield, and
production of rice in Assam. Area has expanded
gradually over the past 25 years. The average
yield of rice remained more or less stationary
until 1989, after which it increased. The overall
annual growth in total rice area, yield, and
production in the state is estimated to be 0.9%,
1.4%, and 2.3%, respectively (Table 5). Thus,
nearly 40% of the production growth over the
period 1971-97 resulted from growth in area.

146
Table 5. Growth rates of area, production and yield of rice the yield growth of summer rice is quite modest,
in Assam 1971-97.
contributing to only 18% of production growth.
Item % Irrigation facilities in the state, mostly created
Autumn rice
by private, investment, have facilitated the
Area 0.43 expansion of area under summer rice. The
Yield 1.11 ***a
1.54 ***
expansion is also partly the result of a shift of
Production
Winter rice autumn rice to summer rice.
Area 0.79 *** Table 6 shows the coefficient of variation
Yield 1.34 ***
Production 2.13 *** (CV) of area and yield of different types of rice
Summer rice in Assam. The CVs of area of autumn and winter
Area 6.95 ***
Yield 1.52 *** rice are lower than those of summer rice. The
Production 8.47 *** higher variability in summer rice production is
Total
Area 0.90 *** due mainly to high variability of area. As area
Yield 1.39 *** under summer rice is very small, variability of
Production 2.29 ***
area can be high because of the lack of
a*** = significant at 1% level. Source of data: Directorate of Agriculture compensating effects over a wider region that
(various years).
may have helped stabilize the total area of
winter rice. It is somewhat surprising to note that
Table 6. Mean and coefficient of variation of different rice the average yield of summer rice is only slightly
types in Assam 1971-97.
higher than that of winter rice. Despite the high
Item Autumn Winter Summer Total level of risk associated with producing winter
rice rice rice rice
rice, this crop seems as productive as, and
Mean perhaps more stable than, summer rice. Yield
Area (000 ha) 603 1,656 73 2,330 trends show that yield fluctuations of summer
Yield (t ha-1) 1.17 1.86 2.25 1.73
Production (000 t) 701 3,112 164 4,024 rice declined after 1987 (Fig. 2) probably due
CVa (%)
mainly to the expansion of irrigation. Similarly.
Area 4 3 33 2
Yield 10 6 19 6 fluctuations in the yield of winter rice have also
Production 12 6 46 7 been lower after the mid- 1980s. Meanwhile, the
1Calculated from the Iinearly detrended data. Source: Directorate of yield of autumn rice appears unchanged over
Agriculture (various years). time.

Yield growth has contributed less in Assam than District-level analysis

in eastern India as a whole, where its
contribution was 86% over the period 197 1-97.
In more recent years, the relative importance of
yield growth in Assam has increased, however,
with the leveling off of the growth in area.
Of the three types of rice culture, winter rice
recorded the yield growth of 1.34% per year.
Because of the dominance of this rice culture,
the overall yield growth in rice for Assam of
1.39% approximates that of winter rice. The area
of winter rice has remained virtually constant,
growing at less than 1% per year. The growth of
area of autumn rice is also very small (less than
0.5% per year) and statistically insignificant.
Only the area under summer rice has increased
rapidly, more so in recent years. The expansion
of rice production in the summer season is
driven mainly by growth in area. In comparison,
Assam has 10 districts, of which the five
(Darrang, Goalpara, Kamrup, Nagaon, and
Sibsagar) account for more than 70% of the rice
area (Table 7). Kamrup is the largest district,
accounting for 20% of the state's total rice area.
Of these major districts, Darrang, Goalpara, and
Kamrup have a relatively higher proportion of
area under low-lying autumn rice. As a result,
the average yields of rice in these districts are
lower than those in Nagaon and Sibsagar, which
have a much lower proportion of autumn rice
area. In Nagaon, summer rice production
expanded rapidly after mid- 1980s and accounted
for nearly 27% of the total output of the district
for the triennium 1995-97. Judging by the
average yield of winter rice, Sibsagar has the
most productive rice environment with Kamrup
and Goalpara the least productive.

147
148
Table 7. Rice area and yield by districts. districts, the share has remained constant or
Triennium average (1 995-97) increased slightly. In most districts, the share of
District summer rice area has increased over time.
Rice area Rice yield
(t ha-1)
The growth rates of area and yield of winter
(000 ha) (%) and summer rice in almost all districts were
9 2.61
statistically significant (Table 9). Except for
Cachar 222
Darrang 319 13 1.80 Lakhimpur District, the growth of yield of total
Dibrugarh 152 6 2.35 rice was highly significant in all districts, the
Goalpara 390 15 1.53
K. Anglong 122 5 2.23 highest being 2.8% in NC Hills. The growth in
Kamrup 516 20 1.67 yield of winter rice in NC Hills (2.5%) and
Lakhimpur 178 7 1.86
NC Hills 14 1 2.75 Cachar (2.3%) was higher as these districts are
Nagaon 336 13 2.21 less affected by flood. The negative growth in
Sibsagar 281 11 2.65
All of Assam 2,531 100 2.01
area under autumn rice in Cachar (-3.0%) and
Karbi Anglong (-0.5%) could be attributed
Sources: Directorate of Agriculture (various years).
mainly to a shift in area from this crop to
summer rice. There is a tendency to shift from
In terms of shift in rice area, the overall autumn rice to summer rice because of the
trend is either stagnation or a decline in the share latter's comparative advantage in yield and
of autumn rice (Table 8). The share of autumn profitability and its relatively lower risk from
rice area declined in Cachar, K Anglong, flood. In Kamrup, the yield of autumn rice
Kamrup, NC Hills, and Sibsagar. In other increased but the area planted to it declined,

Table 8. Percentage share of rice area by districts.

Triennium average
District Overall
Season 1971 -73 1981-83 1991-93 1995-97

Cachar Autumn 22 21 13 11 17
Winter 73 75 80 84 77
Summer 6 4 7 6 6
Darrang Autumn 28 30 32 31 31
Winter 71 70 65 65 68
Summer 1 0 3 4 1
Dibrugarh Autumn 10 14 13 13 12
Winter 90 86 87 87 88
Summer 0 0 0 0 0
Goalpara Autumn 39 40 38 38 39
Winter 59 . 58 57 54 58
Summer 2 2 5 8 4
K.Anglong Autumn 16 9 9 9 11
Winter 83 91 91 90 89
Summer 1 0 0 1 0
Kamrup Autumn 38 38 32 33 36
Winter 60 61 63 61 62
Summer 2 1 5 6 3
Lakhimpur Autumn 15 19 20 19 19
Winter 85 81 80 77 80
Summer 0 0 0 4 1
NC Hills Autumn 64 48 45 42 50
Winter 36 52 55 58 50
Summer 0 0 0 0 0
Nagaon Autumn 21 25 24 25 24
Winter 77 70 57 55 66
Summer 2 4 19 20 10
Sibsagar Autumn 10 9 11 6 10
Winter 89 90 89 92 89
Summer 0 0 0 1 0
Assam Autumn 27 27 25 24 26
Winter 71 72 70 69 71
Summer 2 2 5 7 3

149
Table 9. Growth in rice area and yield by season and district, 1971-97.

Districts Autumn rice (%) Winter rice (%) Summer rice (%) Total Rice (%)

Area Yield Area Yield Area Yield Area Yield

Cachar -3.0*** 0.8 0.9*** 2.3*** 0.8* 0.7 0.2 1.9***

Darrang 1.3*** 1.0* 0.5*** 1.0*** 10.5*** 0.7 0.9*** 0.9***
Dibrugarh 2.6*** 2.3* 1.2*** 1.2*** 8.9* 1.7** 1.3*** 1.3***
Goalpara 0.3* 0.9* 0.1 1.2*** 6.7*** 0.0 0.4*** 1.7***
K.Anglong -0.5 0.1 2.3*** 0.6* 0.4 1.9** 2.0*** 0.6*
Kamrup -0.5* 1.2* 0.8*** 1.3*** 6.7*** 2.1** 0.5*** 1.6***
Lakhimpur 3.4*** 0.3 1.8*** 0.4* 16.3*** 3.2 2.2*** 0.3
N.C.Hills -0.3 2.7*** 1.6*** 2.5*** 13.3*** 3.1*** 0.7*** 2.8***
Nagaon 2.6*** 2.7*** 0.2 1.3*** 10.3*** 2.0** 1.7*** 1.8***
Sibsagar -0.2 1.2** 0.8*** 1.7*** 6.3* 1.7** 0.7*** 1.7***
All Assam 0.4 1.1*** 0.8*** 1.3*** 7.0*** 1.5*** 0.9*** 1.4***
*** ** *
, , = significant at 1%, 5%, and 10% level, respectively.

Table 10. District showing patterns of yield variability in Assam (1971-97).

CV range Autumn rice Winter rice Summer rice Total rice

<10% Darrang Darrang

Dibrugarh, Dibrugarh
Goalpara, Goalpara
Kamrup, Kamrup
Lakhimpur Lakhimpur
Sibsagar Sibsagar

10-1 5% Goalpara Cachar Cachar

Karbi Anglong Karbi Anglong
Nagaon Nagaon

16-20% Cachar N.C. Hills Dibrugarh, NC Hills

Darrang Goalpara,
Dibrugarh, Karbi Anglong,
Kamrup, Kamrup,
Lakhimpur, Nagaon,
NC Hills, Sibsagar
Nagaon,
Sibsagar

>20% Karbi Cachar,

Anglong Darrang,
Lakhimpur,
NC Hills

indicating a shift from autumn rice to other
crops in less productive areas. Some changes in
area in this district occurred-fromnormal ahu
to early ahu, from ahu to summer rice and from
ahu to jute. After the 1980s, a strong growth in
demand for jute led an increase in the price of
jute relative to that of autumn rice. As a result,
the area of jute expanded, while that of ahu rice
decreased, especially in Kamrup, Goalpara, and
Nagaon. Similarly, a shift from normal to early
ahu would have increased the average yield as
the latter is grown mostly under irrigated
conditions using HYVs and fertilizer.
The variability in area, production, and
productivity of the different rice types across
districts did not show any uniform pattern (Table
10). For autumn rice, Karbi Anglong and
Goalpara showed the highest and the lowest CV
values, respectively. Cachar, Darrang,
Dibrugarh, Kamrup, Lakhimpur, NC Hills,
Nagaon, and Sibsagar had the CV range of 16-
20%. For summer rice, Dibrugarh, Goalpara,
Karbi Anglong, Kamrup, Nagaon, and Sibsagar
showed similar levels of variability (CV range of
16-20%). whereas Cachar, Darrang, Lakhimpur,
and NC Hills showed a higher variability (above

150
Table 11. Extent of irrigation and adoption of high-yielding To know whether there is any effect of
varieties (HYV).
modem technology (HYV, fertilizer, and
% irrigated % area under HYV irrigation) on yield variability of rice, the CV of
District area (triennium (triennium 1995-97)
1990-92)
rice yield was regressed on the percentage of
Autumn Winter Summer All area under HYVs (HYV), percentage of area
Cachar 2 92 44 44 49
under irrigation (IRRIG), and per hectare
Darrang 16 57 47 82 51 fertilizer use (FERT). None of the coefficients
Dibrugarh 2 65 38 62 42
were significant indicating that adoption of
Goalpara 5 27 37 67 36
K.Anglong 12 72 61 100 62 modem technology has not affected yield
Kamrup 10 31 59 75 51 variability in Assam.
Lakhimpur 1 12 30 22 26
NC Hills 30 31 54 61 44
Nagaon 17 45 57 93 61 CV = 13.91 -0.15HYV + 0.06 FERT + 1.51 IRRIG
Sibsagar 5 33 47 32 46
Assam 9 39 48 75 47 (0.71) (0.10) (1.94)
Adj. R2 = 0.14
Source of data: Directorate of Agriculture (various years), IRRl (1995).

As the data on area irrigated, fertilizer use,

20%). For winter rice, however, 6 districts-
Darrang, Dibrugarh, Goalpara, Kamrup,
Lakhimpur, and Sibsagar-revealedthe least
variability (<10 %) while Cachar, Karbi
Anglong, and Nagaon had CV ranging between
10% to 15%.
Extent of technology adoption
Rice productivity depends on a variety of
factors-thetype of land on which it is grown,
agroclimatic conditions, and level of adoption of
improved agricultural practices including the use
of HYV seed, fertilizer, and irrigation water.
Although private investment expanded the
irrigation potential in Assam, the overall
irrigated area in this state remains low at 7%,
with only Darrang, K Anglong, NC Hills, and
Nagaon having more than 10% of their rice area
irrigated. The percentage of area under HYVs in
different districts is fairly high (the state average
was 47% for the triennium 1995-97 (Table 11).
The variation in percentage area under HYVs
across districts is quite small with the adoption
rate for all types of rice being in the range 40-
50% for most districts. The adoption of high-
yielding summer rice is high at 70%, with
almost 90% and 75% of the summer rice area in
Nagaon and Kamrup being planted to HYVs,
respectively. These two districts account for over
60% of the summer rice area of the state. The
adoption rates of HYVs for autumn and winter
rice are below 50%.
and area under HYVs are likely to be somewhat
unreliable, a second regression equation was
estimated with the percentage growth rate of
yield as the explanatory variable. Growth rate in
yield is likely to be higher in districts where the
adoption of modem varieties, irrigation, and
fertilizer is rapid. Thus, growth rate in yield can
be considered to be a proxy for adoption of
improved technologies. A positive but
statistically insignificant slope coefficient of the
regression of district-level CV of yield on the
growth rate of yield indicates that adoption of
improved technology has tended to increase the
instability of rice yield, but that this effect is not
strong (Fig. 3). The differences in the CV of
yield across districts are probably mainly due to
environmental factors rather than to a
differential degree of adoption of improved
technologies.
Variance decomposition analysis
The analysis revealed that the mean area, yield,
and production of rice for the state changed
between the two periods by 14%, 19%, and
35%, respectively. Average yield increased by
more than 20% in Cachar, Kamrup, Nagaon, and
Sibsagar. A major expansion in mean area
occurred in Dibrugarh (26%), K Anglong (39%),
Lakhimpur (40%), and Nagaon (25%). In
Nagaon, an expansion in area under summer rice
is the major reason for the increase in average
rice area. In other districts, increases in autumn

151
 and winter rice area accounted for most of the Assam has not been at the cost of increased
area expansion. relative variability, even though the absolute
The variance of area for the state increased variability has increased.
statistically significantly, by 190%. However,
the variance of area in most districts declined, Farm-level analysis
indicating that the increase in variance of area
for the state must have resulted from an increase In spite of several pieces of land reform
in area correlation across districts. The increase legislation, share tenancy is quite widespread in
in yield variance was statistically insignificant Assam. Table 12 shows the types of tenancy and
for the state as well as for individual districts. different tenurial arrangements of the tenant
The production variance for the state increased farm households in the three districts under
by 172%, and this increase was statistically
significant. The only district that recorded a
Table 12. Some features of farm households in flood-prone
significant increase in production variance was areas of the sampled districts.
Kamrup. Overall, about 16% of the increase in
Feature Lakhimpur Kamrup Sibsagar
the variance of production for the state was due
to the increase in the variance of production Percent of tenant farmers 38 40 29
Tenurial arrangement
within districts and the remaining 84% was due (% of farmers)
to the increase in covariance among districts. Fixed share with cost - 2 -
For the state as a whole, changes in area-yield Fixed share without cost 38 56 70
Variable share with cost 9 13 7
covariances and changes in yield variances Variable share without cost 53 29 23
accounted for more than 50% of the total change Cost of cultivation (Rs ha-1)
Local variety 2,628 2,155 1,973
in production variance. High-yielding variety 4,737 4,518 4,729
Despite the changes in production variance, Share of different sources
of income (%)
there was no significant change in relative Rice 48 74 52
variability of area, yield, and production (as Other crops a 21 22 18
Homesteadb 31 4 30
measured by the respective CVs). This indicates Net farm income (Rs
that any change in variance of production was household-1) 34,233 30,533 33,615
compensated for by a proportional change in the aKitchen garden, coconut, bamboo and others. bMustard, summer and

mean. Overall, the growth in rice production in winter vegetables, sesamum, jute, blackgram, lentil, and potato.

152
 study. The sampled farmers were categorized
under three distinct types of tenancy based on
the proportion of land leased. Four kinds of
tenurial arrangements were observed. In the case
of “fixed share with cost,” tenants absorb the
cost of inputs and pay the landowners a fixed
predetermined amount of their produce
irrespective of crop success or failure. But in a
fixed share without cost, the landowners provide
all inputs, except labor, but require a compara-
tively larger amount of (predetermined) produce
from the tenant, irrespective of crop success or
failure. Similarly, under the categories of
variable share with cost and variable share
without cost, the proportion of the share of
produce given to the landowners varies from
one-tenth to one-fourth and one-third to one-half
of the actual produce, respectively. The table
shows that the without-cost tenurial arrangement
were more prevalent than the with-cost
arrangements. This might be due to
apprehension of crop losses from floods and the
tenant’s intention of not shouldering the input
cost in the event of crop failure. In the relatively
flood-prone Lakhimpur District, the proportion
of farmers with a fixed share contract is lower
than that in Sibsagar, where the production
environment is more stable. The prevalence of
variable share arrangements in the more flood-
prone district may be due to its risk-reducing
feature as the share is renegotiated in the event
of crop loss.
The percentage share of income from rice to
total income’ was very high in all the districts,
ranging from 52% in Lakhimpur to 61% in
Kamrup. Homestead income likewise plays an
important role in compensating losses in farm
income in flood-prone areas. In general, the
homestead is located in uplands, and such lands
are not generally affected by flood. The
activities included in the homestead provide
safety net by compensating for losses in farm
income and by supplementing farm income.
A relatively higher share of rice income in
the household income in Assam in comparison
3As the opportunities for earning nonfarm income in the survey area are rather limited, we have ignored non-farm
income in these calculations.
with that in other states is indicative of the
importance of rice in this state. As the economic
benefit from stabilization of rice yield is directly
proportional to the share of rice income in the
total household income (Pandey et al, this
volume), technologies that stabilize rice yield
can be expected to be more valuable in Assam
than in other states of eastern India.
Risk management strategies
Ex ante strategies
These strategies were designed primarily to
avoid or minimize losses from flood damage.
Farmers developed them on the basis of their
experiences, depending on the time and extent of
flood in a particular region. The following are
the examples of major ex ante strategies used by
farmers.
Flood escape. Establishment of rice before
flood arrives is one of the strategies followed in
flood-prone areas. The Regional Agricultural
Research Station, Titabar, Assam Agricultural
University developed two “flood-escaping”
varieties-Luitand Kapili-thatcould be
harvested within 90 d. Planting these varieties to
enable harvest before flood arrives is a good
escape strategy.
Flood-tolerant varieties for lowlands.
Usually, tall local varieties are grown on
medium lowlands and lowlands. These varieties
can withstand moderate degrees of submergence
because of their tallness.
Staggered planting. Planting rice over a
period of time with adjustments made such that
it does not directly confront flood is also a
common strategy. Seedlings are subsequently
transplanted in staggered fashion as the flood
recedes. The State Agricultural University has
developed several varieties with higher
production potential for the staggered planting
schedule.
Fragmentation of landholding. Tiny farms in
the region are mostly composed of several
parcels. Although these parcels maybe the result
153
of inheritance over the years, they may have
played a vital role in pooling risk and thereby
reducing overall risk.
Crop diversification. Crop diversification is
one of the mechanisms adopted by farmers to
guard against heavy losses under stress
conditions. It primarily depends on resource
availability and climatic conditions. Farmers
usually grow vegetables within the homestead,
but in years when sali rice is lost from floods,
they do large-scale vegetable cultivation even in
the main crop field.
Mixed cropping. In lowlands, farmers
practice mixed cultivation of ahu and bao rice.
Ahu is grown as chance crop. If ahu rice escapes
flood, farmers can grow both ahu and bao crop.
Even if there is early flood damage to the ahu
crop, farmers can at least have some harvest
from the bao crop.
Ex post strategies
Asset disposal. Disposal of assets during
difficult times is one important survival strategy
used when losses do occur. Asset disposal,
although essential for survival in stress
conditions, can increase the incidence of poverty
in the long run. Farmers may not be able to
reacquire productive assets. For example,
bullocks cannot be easily acquired after the
situation returns to normal. This is likely to
affect farmers’ long-term productivity adversely,
thus further perpetuating poverty.
Off -farm income. Generating income from
off-farm jobs is an important strategy for
survival under risky situations. Affected farmers,
especially marginal and small farmers,
temporarily migrate to nearby towns and cities
for work, mostly in the unorganized (private)
sector.
Government help. Farmers also receive help
from the governmental and non-governmental
agencies during and immediately after floods.
But this assistance is primarily aimed at helping
them survive during the emergency period, not
at increasing their long-term productivity.
154
Concluding remarks
The rice production system of Assam is
characterized by high levels of flood risk and
low yields. In spite of the importance of rice in
the state’s economy, the yield growth remains
lowest among the eastern Indian states. The
major features of rice production systems have
changed very little over the past 25 years,
although the expansion of summer rice has
increased in some districts. Expansion of
irrigation since mid-1 980s has been instrumental
to the rapid expansion of summer rice. Autumn
and winter rice, however, dominate rice
production as these two contribute to more than
90% of Assam’s total output.
Although the area under autumn rice has
shown a tendency to decline as a result of a shift
to summer rice and to other crops, this rice
culture remains very important in Assam and
accounts for over 25% of the total output.
Productivity of autumn rice is low and
technologies are needed to improve its average
yield. As the crop generally suffers from flood
during its later growth stage, use of shorter
duration varieties that mature before floods
arrive can reduce risk. Similarly, the early
establishment of autumn rice can be an
important risk-avoiding strategy. But the success
of such a strategy is conditional on the
availability of supplemental irrigation. A shift to
early autumn rice (early ahu) has occurred only
in areas with access to irrigation. Government
policies to further expand public and private
irrigation systems in Assam can thus help reduce
the risk associated with the production of
autumn rice.
For winter rice, which accounts for more
than 70% of the total rice output, yield growth
over the past 25 years has been very modest.
Several factors. including risk, limit the adoption
of modem varieties and fertilizer. One important
constraint in Assam is its poorly developed
infrastructure. As a result, costs of inputs
increase while farm-gate prices remain low.
Investments in infrastructure development in
 Assam are needed as they not only improve the
economics of rice production but also reduce
overall risk by providing opportunities to
diversify agriculture and income.
An analysis of changes in instability in rice
production in Assam indicates that production
growth has not resulted in an increase in
production instability at the district and state
level. However, the tendency toward an increase
in interdistrict production covariance is a cause
for concern, as this can lead to increased
amplitude of fluctuations in total output.
Correlated climatic patterns and the use of
similar varieties across districts may have
resulted in a covariate movement in production
across districts. If the increased covariate
movement is caused by similarity of varieties
grown, a more decentralized breeding and
testing program may be needed to take
advantage of local adaptation and thereby
reduce output fluctuations through
compensating movements across locations. This
paper did not address this issue because of a
lack of data.
The farm-level study indicates that the share
of rice income in total income of Assam is
around 50%. This is quite high relative to other
states of eastern India (Pandey et al, this
volume). With such a high share of rice income,
economic benefits from stabilization of rice
yield can be substantial. Varieties and crop
management practices that reduce risk can be
instrumental in improving rice yield in Assam.
To help develop and target such technologies, a
detailed microeconomic analysis of the patterns
of adoption of rice varieties in representative
locations of Assam is needed.
As shown in the farm-level analysis, the
yield of boro rice is substantially higher than
that of ahu and sali rice. Therefore, if irrigation
potential is created in the flood- prone area,
especially during the rabi and summer seasons,
farmers can use large-scale boro and early ahu
rice cultivation and thus avoid planting sali rice
in flood-prone situations. These strategies and
shift in area will enable the state to increase rice
production substantially.
To have systematic information on farmers’
perception of risk and risk management
strategies adopted by the farmers in the flood-
prone areas, a long-term project needs to be
initiated. This will enable the researchers to
obtain relevant and reliable data that will be of
great use for making appropriate policy
decisions.
References
Bhowmick BC. 1992. Identification and
optimization of resources in major farming
systems. Agric. Econ. Res. Rev. 5(1):
Centre for Science and Environment. 1996.
Floods, flood plains and environmental
myths. State of India’s Environment, A
Citizen Report, Centre for Science and
Environment, New Delhi.
Das R. 1995. Farming system approach in
developing ideal agricultural production plan
under different agro-ecological situations in
the North Bank Plains Zone of Assam. PhD
thesis, Department of Agricultural
Economics, Assam Agricultural University,
Jorhat, India.
Directorate of Agriculture. Various years. Basic
agricultural statistics. Statistical Wing,
Directorate of Agriculture, Assam,
Khanapara, Guwahati, India.
Directorate of Economics and Statistics. Various
years. Statistical hand book of Assam.
Directorate of Economics and Statistics,
Government of Assam, Guwahati, India.
Gogoi JK. 1998. An economic estimation of risk
in rice cultivation in Upper Brahmaputra
Valley Zone of Assam. PhD thesis,
Department of Agricultural Economics,
Assam Agricultural University, Jorhat, India.
Hazell PBR. 1982. Instability in foodgrain
production. Research Report 30.
Washington, D.C. (USA): International Food
Policy Research Institute.
Hydrogeology and Ground Water Resources
Development. 1980. Perspective of Assam
North Eastern Region, March 1980, Central
Ground Water Board, Regional Office,
Guwahati, Government of India.
155
 ICAR. 1981. National agricultural research
project. Report of the ICAR Research
Review Committee for AAU, Jorhat, Assam,
Krishi Bhavan, New Delhi, India.
IRRI (International Rice Research Institute).
1995. World rice statistics 1993-94. Los
Baños (Philippines): IRRI.
Phukan N. 1996. Statistical handbook.
Government of Assam, Guwahati, India:
Directorate of Economics and Statistics.
Appendix 1. Particulars of agroclimatic zones of Assam.
Notes
Authors' addresses: B.C. Bhowmick and J.K.
Gogoi, Assam Agricultural University, India;
S. Pandey and R.A. Villano, International
Rice Research Institute, MCPO box 3 127,
Makati City 1271, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

Rice area
Area (triennium ending 1997)
Agroclimatic zone/district
km2 % of state share 000 ha %

North Bank Plains Zone 1422 1 18 497 20

Lakhimpur 5646 7 178 7
Darrang 8775 11 319 13
Upper Brahmaputra Valley Zone 16013 20 433 17
Dibrugarh 7024 9 152 6
Sibsagar 8989 11 281 11
Central Brahmaputra Valley Zone 5561 7 336 13
Nagaon 5561 7 336 13
Lower Brahmaputra Valley Zone 20222 26 906 35
Goalpara 10359 13 390 15
Kamrup 9863 13 516 20
Barak Valley Zone 6962 9 222 9
Cachar 6962 9 222 9
Hills Zone 15222 19 136 6
Karbi Anglong 10332 13 122 5
N.C.Hills 4890 6 14 1
Assam 78201 2531

Geographical area as per 1971 census. Source: CAR (1981).

a

156
Risk and its management in the rainfed rice
ecosystem of Bihar
J. Thakur

Rice production in Bihar is characterized by high yield and area variability. The high risk
associated with rice production in Bihar has led to sluggish growth in productivity and even an
absolute decline in the area under rice. Based on the analysis of time-series data covering
the period 1973-74 to 1995-96, the district-level coefficients of variation of yield and area
were as high as 51% and 36%, respectively. Production variability was quite high in all
agroclimatic zones but more so in the South Bihar Plains, which is characterized by
submergence. The adoption of modern varieties was limited except in irrigated areas. The
analysis indicates that rice technologies that can impart yield stability in the highly unstable
hydrological conditions of Bihar are needed to increase rice productivity in this relatively
poorer state of India.

Agricultural production is subject to a large
degree of risk, both natural and institutional.
This is more so in some of the underdeveloped
states, such as Bihar, where vagaries of nature
are more pronounced and where less has been
achieved in providing a secure base for
agriculture through irrigation facilities, crop
protection measures, and the like. Further, a
weak and inadequate marketing system
exacerbates the situation. Besides, no organized
insurance exists to distribute risks and protect
individual farmers from huge losses.
The nature of these risks can be classified
into three categories (1) flood and drought
caused by inadequate and uneven distribution of
rainfall, (2) occurrence of pests and diseases,
and (3) economic and marketing factors such as
instability of prices, marginal profits, parity
prices among competing crops, market demand,
availability of storage and transport facilities,
and others. In addition, fluctuating crop yields
have become a regular feature and farmers have
no alternative except to succumb to the vagaries
of nature.
Bihar is the fifth largest state of India in size
(5.3% of the total geographical area) and the
second most populous state (more than 10% of
the total population). It has remained by and
large rural and about 85% of the population lives
in villages. Agriculture is the main occupation in
the rural areas. About 79% of the working
population directly depends on agriculture.
Agriculture alone contributes nearly 45% to the
state's net domestic product.
The main objectives of this study are (1) to
measure variability in area, production, and
yield of rice in Bihar, (2) to estimate the growth
rate in area, production, and yield of rice, (3) to
quantify the extent of yield losses caused by
various factors, and (4) to identify farmers' risk
management options.
Rice production scenario
Rice is the staple food of the people of Bihar and
an important component in shaping the economy
of the state. Bihar grows nearly 5.0 million ha of
rice, which accounts for about 12% of the total
rice area of the country. Rice covers about 56%
of the total gross cropped area of the state.
However, crop productivity averages 1.9 t ha"
(rough rice) in comparison with the national
average of 2.5 t ha". About 66% of the rice area
still depends on rainfall and is vulnerable to
droughts and floods. In addition, it is cultivated
under highly variable and heterogeneous

157
conditions. If we look at the growth trend of
area, production, and yield of rice over the
period and compare it with that of population
growth in the state, the picture is gloomy.
Growth in area has declined by 0.42% during
1973-74 to 1995-96. This is attributed to the
very unstable nature of rice cultivation in the
state because of uncertain monsoon. Farmers
sometimes experience severe droughts; other
times, they contend with devastating floods.
Yield growth consequently remained at a low
1.3% y-1 during 1973-74 to 1995-96. Population,
on the other hand, increased at a much faster rate
(2.4% y-1), with the gap between rice production
and population becoming wider over the years.
During the entire period, rice production failed
to keep pace with population growth.
Characteristic features of agroclimatic
zones
Bihar is divided into four agroclimatic zones: the
Northwest Plains, the Northeast Plains, the
South Bihar Plains, and the Chotanagpur
Plateau. The Northwest Plains comprise the
districts of West and East Champaran,
Gopalganj, Siwan, and Saran. The climate is
tropical humid to subhumid. The northern
districts of East and West Champaran receive
more than 1,300 mm of rainfall. The land is
mostly alluvial plains sloping toward the
southeast with a very low gradient as evidenced
by the direction in which the rivers flow. The
soils under the influence of Gandak, Burhi
Gandak, and Ghaghra rivers are mostly
calcareous with varying amounts of lime in
them.
The Northeast Plains comprise the districts
of Sitamarhi, Muzaffarpur, Vaishali, Darbhanga,
Madhubani, Samastipur, Pumea, Katihar,
Saharsa, and Begusarai. This zone has a tropical
monsoon climate and can be classified as humid
to subhumid. Average annual rainfall is 1,405
mm.
The South Bihar Plains comprise the
districts of Gaya, Aurangabad, Rohtas, Bhojpur,
Patna, Nalanda, Nawada, Monghyr, and
Bhagalpur. This zone covers the alluvial plains
of the Ganga River on its southern side and
sediments are received from the river. South of
158
the natural levee of the Ganga is a vast stretch of
backwaters known as tal lands. The floodplains
of Ganga, which get reworked, eroded, and
deposited at regular intervals, are higher than tal
lands and known locally as diara lands. Average
annual rainfall is reported to be only 1,110 mm
in this zone.
The Chotanagpur Plateau comprises the
districts of Hazaribagh, Giridih, Santhal
Parganas, Dhanbad, Palamu, Singhbhum, and
Ranchi. This zone is characterized by a humid to
subhumid tropical monsoon-type climate.
Average annual rainfall is 1,321 mm.
The rice ecosystems in Bihar
Rainfed uplands
Tanr lands: Plain to slopy (0-30%) fields
without surface water accumulation;
loose fragile soils with poor water-
holding capacity.
Tanr I: Land adjacent to dwellings and used
mainly for growing maize,
vegetables, and rice nursery; an
extended kitchen garden with
supplemental irrigation from wells.
Tanr II: Leveled land away from the village
but with good soil depth; unbunded
uplands.
Tanr III: Sloping and stony land away from
villages with very little soil depth
and little or no capacity to retain
moisture; the most fragile upland
rice/millet system.
Rainfed lowlands
Shallow rainfed: Flat lands as well as terraced
rice fields with a water regime of 0-
25 cm. Has two subcategories: (1)
drought-prone and (2) drought- and
flood- prone.
Intermediate rainfed: Water depth ranges from
25 to 50 cm. Areas receiving normal
rainfall, where intermittent flooding
is a problem, and areas receiving
erratic rainfall, where droughts and
floods are major constraints.
Semideep rainfed: Low-lying, flat, unbunded ill- Table 1. Mean value of rice area, production, and yield by
agroecological zones (1973-74 to 1995-96).
drained areas, where water stagnates
for 4-5 mo during the wet season; Zone Period I Period II Percentage
1973-74 to 1983-84 to change over
water regimes vary from 50 to 100 1982-83 1995-96 period I
cm.
Area (000 ha)
Deepwater: Water depth varies from 50 to 200 Northwest Plains 673 692 2.9
cm. Soils are heavy and rich in Northeast Plains 1,597 1,552 -2.8
South Bihar Plains 1,342 1,353 0.8
organic matter. Direct seeding is
Chotanagpur Plateau 1,667 1,462 -12.3
generally followed, but, in areas Bihar 5,279 5,059 -4.2
where water does not dry out even
Yield (t ha-1)
in May, transplanting is done. Northwest Plains 1.3 1.8 39.8
Irrigated lands: In much of this system, rainfall Northeast Plains 1.2 1.4 21.4
South Bihar Plains 1.5 2.0 33.6
supplements irrigation water. Chotanagpur Plateau 1.3 1.5 13.9
Drainage in the irrigated system is Bihar 1.3 1.6 25.0
generally good, but, in certain areas, Production (000 t)
waterlogging becomes a constraint. Northwest Plains 852 1,224 43. 17.98
Northeast Plains 1,873 2,209 18.0
South Bihar Plains 2,036 2,719 33.5
Data and methods Chotanagpur Plateau 2,155 2.1 30 -1.1
Bihar 6,918 8,286 19.8

The analysis is divided into two sections. The

first section is based on the analysis of
secondary data at state, district, and agroclimatic
zone levels from 1973-74 to 1995-96. The time-
series data were divided into two segments with
the first covering 1973-74 to 1982-82 and the
second covering 1983-84 to 1995-96. Changes
in production variability and growth rates
between these periods are considered. The
choice of this period was based mainly on the
availability of a consistent set of data for 31
districts. The second section presents the
findings of microlevel analysis based on farm-
level data from different ecosystems of the state.
Time-series data for various years were obtained
from the Directorate of Economics and
Statistics, Government of Bihar.
Results and discussion
Estimation of growth trend
The contribution of the Northwest Plains is the
lowest in terms of both rice area and production,
although its share has increased in the more
recent periods (Table 1). The other three zones
account for most of the rice area and production
in Bihar.
The average rice area declined by about
4.2% during the second period in comparison
with the first period. This decline was mainly
attributed to a decline in area in the Northeast
Plains (2.8%) and in Chotanagpur Plateau
(12.3%). For yield, the Northwest Plains and
South Bihar Plains recorded increases of about
40% and 33%, respectively, during the second
period. A moderate increase in yield was noticed
for the Northeast Plains and Chotanagpur
Plateau during the same period. A similar trend
was found for rice production, except in the
Chotanagpur Plateau, where average production
declined by 1.1% compared with the first period
(mainly because of a decline in rice area).
Table 2 shows that the rice area of the 18
districts (accounting for 58.1% of the total rice
area) had negative growth ranging from -0.04%
in Aurangabad to -1.97% in Dhanbad. Only five
districts recorded a positive area growth in the
range of 1-2% annum-1; the remaining eight
districts experienced area growth of less than 1 %
annum-1. Yield growth was estimated to be
above 2% annum-1 for only five districts: West
Champaran, Gopalganj, Pumea, Bhojpur, and
Rohtash. All these districts represent the
irrigated rice ecosystem of Bihar. A significant
positive yield growth in Pumea District is
caused by the expansion of area under boro
(summer) rice, which gives a higher yield per
unit area. In fact, boro rice is expanding to a
certain extent also in Saharsa, Pumea, Katihar,

159
 Table 2. Growth rates of rice area, production, and yield in Table 3. Growth rates of rice area, production, and yield
Bihar (1973-74 to 1995-96): by agroecological zone (1973-74 to 1995-96).a

District Area Production Yield Zone Area Production Yield

(%) (%)

Northwest Plains Northwest Plains 0.1 ns 2.2*** 2.2.9.

West Champaran -0.95*** 1.96*** 2.85*** Northeast Plains -0.4 ns 0.7 ns 1.1**
West Champaran -0.12 ns 1.25** 1.43*** South Bihar Plains 1.1 ns 2.0*** 1.9***
Gopalganj 1.33*** 3.97*** 2.68*** Chotanagpur Plateau -1.1*** 0.8 ns 0.3 ns
Siwan 1.56*** 3.37*** 1.70** Bihar -0.4** 0.9 ns 1.3***
Saran 0.25 ns 2.11* 1.87**
a***,**
Northeast Plains = significant at 1% and 5% level, respectively. ns = not signifcant.
Sitamarhi -1.07*** -0.47 ns 0.56 ns
Vaishali -0.40** 0.34 ns 0.84 ns
Muzaffarpur 0.61* 1.01 ns 0.41 ns population growth rates, even for the Northwest
Darbhanga .023 ns 0.87 ns 0.43 ns Plains and South Bihar Plains, both of which
Madhubani -0.60*** -0.1 7 ns 0.82**
Samastipur 1.08*** 1.92* 0.88 ns registered positive yield growth rates.
Begusarai 2.36*** 3.48** 0.92 ns
Saharsa 0.64* 1.88** 1.33**
Purnea -0.70*** 2.83*** 2.10***
Area, production, and yield variability
Katihar 0.49* 0.78 ns 0.47 ns
South Bihar Plains
-1.32*** 0.90 ns
The coefficient of variation, which gives the
Munger -0.38 ns
Bhojpur 0.02 ns 2.19*** 2.23*** relative change in variability, was estimated to
Rohtash 1.04* 2.98 2.10*** examine the area, production, and yield
Patna -1.28*** -0.30 ns 1.6**
Gaya -0.16 ns 1.05 ns 1.08* variability of rice. The basic data comprise time-
Nawada -1.02** -1.32* -0.47 ns series information on rice area, production, and
Aurangabad -0.0 4 ns 1.78*** 1.89***
Nalanda 0.22 ns -0.68ns -0.89 ns yield for the districts of Bihar during 1973-74 to
Bhagalpur -0.43* 1.17* 1.54** 1995-96. Here, yields are estimated by dividing
Chotanagpur Plateau
Hazaribagh -1.05*** -1.24 ns -0.27 ns
production by area sown. To estimate the
Ranchi -1.35*** -1.05 ns 0.41** coefficient of variation, the data were first
Santhalpargana -1.28*** -1.32** -0.02 ns
-1.97*** 0.20 ns
linearly detrended.
Dhanbad -1.69*
Palamu 0.42 ns -0.70 ns -0.30 ns The coefficient of variation of rice area of
Singhbhum -0.68*** -0.30 ns 0.33 ns the 14 districts (46% of total rice area of the
Giridih -0.70* -0.38 ns 0.30 ns
state) was less than 10% (Table 4). However,
a ***,**, * =significant at 1%. 5%. and 10% level, respectively. ns = not area variability was high and exceeded 20% in
significant.
Madhubani, Rohtash, and Nalanda. Madhubani
is a submergence-prone district; both Rohtash
Darbhanga, and Madhubani districts of the and Nalanda have unreliable irrigation based
Northeast Plains. Twenty-one other districts mainly on canal and lift irrigation, respectively.
reported positive yield growth, ranging from Variability of rice yield was between 10%
0.2% in Dhanbad to about 1.9% in Saran and and 20% for two districts (8% of total rice area),
Aurangabad. Again, the latter district having a East and West Champaran (Table 4). The yield
slightly higher yield growth represents the Variability for 23 districts covering 80% of the
irrigated rice ecosystem of the state. A similar total rice area was between 20% and 30% and
trend was found for production growth. about 12% of the state's rice area experienced a
At the aggregate level, the area growth for yield variability of more than 40%. Overall, the
the state as a whole was negative (-0.4%) district-level yield variability is quite high in
because of the negative area growth in the Bihar, partly due to the high variability of
Chotanagpur Plateau (Table 3). The yield rainfall (Table 5).
growths for the Northwest Plains and South Table 6 presents analyses of variability for
Bihar Plains were positive and significant. The agroclimatic zones. The South Bihar Plains
Chotanagpur plateau experienced insignificant exhibited the highest variability in area and quite
yield growth during the same period and the a high variability in yield also. Production
Northeast Plains registered a yield growth of variability across the agroecological zones was
1.1 %. The yield growth rates were less than the highest (23%) for the Northeast Plains and

160
Table 4. Mean and coefficient of variation (CV) of rice area Table 5. Coefficient of variation of rainfall in Bihar (1973-
and yield in Bihar (1973-74 to 1995-96). 74 to 1992-93).

Area Yield Agroecological zone a

District Month
Mean CV Mean CV NWP NEP SBP CHP Bihar
(000 ha) (%) (t ha-1) (%)
June 61 56 73 92 71
Northwest Plains July 42 38 44 76 50
West Champaran 201 7 1.8 18 August 50 57 45 77 58
East Champaran 213 9 1.4 18 September 55 59 59 83 64
Gopalganj 90 8 1.5 23
a
Siwan 93 10 1.5 26 NWP = Northwest Plains, NEP = Northeast Plains, SBP = South Bihar
Saran 86 8 1.5 26 Plains, CHP = Chotanagpur Plateau.
Northeast Plains
Sitamarhi 142 9 1.3 29 Table 6. Mean, standard deviation, and coefficient of
Vaishali 59 6 1.4 43 variation (CV) of rice area, production, and yield by
Muzaffarpur 141 12 1.2 25 agroecological zone (1973-74 to 1995-96).
Darbhanga 103 17 1.1 29
Madhubani 176 23 1.4 51 Zone Mean a CV
Samastipur 75 12 1.5 47 (000 ha) (%)
Begusarai 18 15 1.3 29
Saharsa 203 11 1.2 26 Area (000 ha)
Purnea 270 15 1.3 37 Northwest Plains 684
Katihar 123 10 1.3 34 5
(13)
South Bihar Plains
Munger 161 17 1.5 32 Northeast Plains 1,511
Bhojpur 192 6 2.3 32 9
(30)
Rohtash 300 31 2.1 29
Patna 112 9 1.5 26 South Bihar Plains 1 ,348
Gaya 232 17 1.7 32 10
(27)
Nawada 97 16 1.4 45
Aurangabad 132 13 1.8 25 Chotanagpur Plateau 1,507
Nalanda 130 36 1.5 30 6
(29)
Bhagalpur 152 8 1.3 36 Bihar 5,051 6
Chotanagpur Plateau
Hazaribagh 123 8 1.4 35 Yield (kg ha-1)
Ranchi 342 11 1.5 31 Northwest Plains 1,558 15
Santhalpargana 349 8 1.4 23 Northeast Plains 1,309 17
Dhanbad 56 17 1.3 26 South Bihar plains 1,797 17
Palamu 89 20 1.3 50 Chotanagpur Plateau 1,380 18
Singhbhum 335 5 1.3 24 Bihar 1493 14
Giridih 95 12 1.4 42
Production ( 000 t)
Northwest Plains 1,070
lowest ( 18%) for the Northwest Plains. While (14) 18
the Chotanagpur Plateau represents drought-
Northeast Plains 1,979
prone upland environments, the South Bihar (26) 23
Plains and Northeast Plains represent
South Bihar Plains 2,435
submergence-prone environments. Both the area 21
(32)
and yield variability of these zones are
Chotanagpur plateau 2,088
accordingly higher than those of the Northwest 21
(27)
Plains, which represent mostly the irrigated
environment. Bihar 7,565 18
a
Numbers in parentheses indicate percent of the respective total.
Adoption of modern varieties

Farmers of Bihar grow some modem varieties,
although the rates of adoption are quite low
except in irrigated environments (Table 7). A
majority of farmers (48-60%) still grow local
varieties of rice under rainfed and upland
ecosystems. This suggests that farmers in these
ecosystems are unwilling to adopt modem
varieties probably because of the greater risks
involved.
Estimating yield loss
Yield loss is estimated based on the average loss
associated with the presence of technical

161
Table 7. Adoption of modern rice varieties in Bihar (% of Risk management options
farmers).

Ecosystem Local Modern
variety only variety only
(LV) (MV)
Rainfed upland 60 - 40
Rainfed lowland 48 5 48
Irrigated 10 63
Bihar 39 23
Numbers in parentheses indicate percent of total farms. Source: Field
survey.
constraints, the percentage of area affected by a
constraint, and the probability of occurrence of a
constraint. Total loss was estimated by
multiplying average yield loss by total area
under a particular production system. Loss
estimates were obtained through a survey of
researchers, farmers, and extension workers. The
methodology used to generate and analyze the
data is detailed in Thakur and Hossain (1998).
Table 8 shows estimates of yield loss from
technical constraints for the three different rice
ecosystems in Bihar. Results showed maximum
yield loss (972 kg ha") in the rainfed lowland
ecosystem followed by the irrigated ecosystem
(943 kg ha"). The minimum loss (785 kg ha")
was noted in the rainfed upland ecosystem. The
results further indicated that the estimated yield
losses from technical constraints across
ecosystems are substantial and account for a
large portion of yield forgone. The loss estimates
also showed big differences in magnitude among
the constraints. The yield loss caused by insects,
pests, and weeds was maximum (39%), followed
by diseases (24%), climate and environment
(15%), soil-related problems (11%), and
physiological and genetic problems (10%).
Both LV Risk under a rainfed rice ecosystem refers to the
and
MV situation when the crop suffers losses as a result
of flood and/or drought. Apart from this, sudden
outbreaks of pests or diseases cause severe
28 losses to the standing rice crop. In this situation,
38
farmers seek risk management options to
recover from such losses. Farmers surveyed
during the cropping year 1996-97 used the
following risk management options.
Replanting of rice after early recession of
floodwater from the field. Replanting is a
common practice to cope with early loss of
seedlings. Farmers grow more seedlings than
necessary in their nurseries so that these extra
seedlings can be used for replanting if the need
arises. Seedlings are also borrowed or purchased
from neighboring and sometimes even distant
villages. Uprooting of transplanted rice from the
unaffected plot to other plots is another method
used. This practice is popularly known as
kharuhan.
Changing the cropping pattern. When
floodwater recedes late, resource-rich farmers
plant a wheat crop after proper tillage
operations, whereas resource-poor farmers
prefer to grow a para crop such as lathyrus,
lentil, linseed, rapeseed, and mustard.
Temporary migration. As agriculture is the
main source of income for the rural poor of
Bihar, marginal farmers and landless laborers
migrate to cities to supplement their family
incomes. However, family income is also
generated through dairy enterprises.

Table 8. Estimates of yield loss (kg ha-1) from technical constraints by constraint group and ecosystem.a

Ecosystem Insects, pests, Diseases Climate/ Soils Physiological Total

and weeds environment and genetic

Rainfed upland 363 186 80 78 78 785

Rainfed lowland 310 234 194 106 128 972
Irrigated 41 3 245 100 119 66 943
Bihar 358 227 136 104 95 920
(39.0) (24.5) (15.0) (11.0) (10.5) (100.0)

Rough rice. Source: Thakur and Hossain (1998). Numbers in parentheses indicate percent of total yield loss. Source: Field
a

survey.

162
Conclusions

This investigation on risk and its management in

the rainfed ecosystem of Bihar indicates that the
state's rice area has declined by about 4.17%
during 1983-84 to 1994-96 mainly because of
the decline in rice area in the Northeast Plains
and Chatanagpur Plateau. Production variability
of rice was much higher than area variability,
which was also quite large. Yield variability
across the agroecological zones was the highest
for the Northeast Plains. A yield growth of 2%
annum-1 was observed only for the five irrigated
districts of West Champaran, Gopalganj, Purnea,
Bhojpur, and Rohtash. As to the extent of
adoption of modem rice varieties, 62.5% of the
farmers in the irrigated ecosystem cultivate only
modem varieties in their fields. Many farmers
(47% to 60%) still grow local varieties under the
rainfed and upland rice ecosystems. Estimation
of yield loss from biotic and abiotic constraints
showed that the highest loss occurred in the
rainfed lowlands. These findings suggest the
need for more stable varieties and crop
management technologies that can stabilize rice
yields in the rainfed environments of Bihar.

Reference

Thakur J, Hossain M. 1998. Yield gaps and

constraints to rice production in Bihar,
eastern India. Paper presented at the
International Workshop on Prioritization of
Rice Research in Asia, 20-22 April 1998,
International Rice Research Institute, Los
Baños, Philippines.

Notes

Author's address: Rajendra Agricultural

University, Bihar, India.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
2 1-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
163
Risk and its management in rainfed rice ecosystem
of West Bengal
N. K. Saha, S. K. Bardhan Roy, and U. S. Aich

West Bengal experienced a rapid change in rice production as the use of modern varieties
expanded with the increase in tubewell irrigation and shift to boro rice systems. This paper
analyzes the pattern of variability in rice production in West Bengal and documents evidence
on farmers risk- coping strategies that are based on manipulating cropping systems. The
paper highlights the need to further improve rice productivity and diversify rice production
systems to increase farmers' income as well as reduce overall risk.

West Bengal is the most densely populated State is characterized by a predominance of marginal
in India (population density 767 persons km2). It and small farmers (more than 91%) and
covers 8.88 million ha (2.7% of nation's scattered and fragmented holdings (average size
geographical area) and has a population of 68.07 0.90 ha).
million (more than 8% of country's population) The state is divided into two broad
(1991 census). Seventy-five percent of agroecological zones and seven subregions on
population lives in rural areas (in 37,910 the basis of differences in soil characteristics,
villages) and depends on agriculture, directly or topography, rainfall, and temperature. Table 1
indirectly, for livelihood. The agricultural sector shows the geographical boundaries covered by
these zones/subzones.
Table 1. Agroclimatic zones in West Bengal, India.
Rice covers 5.8 million ha of land in West
Bengal. It grows across different agroecological
Agroclimatic zone/subregion Districts covered
environments in three seasons-prekharif(aus),
Eastern Hills and Plateau kharif (aman), and summer (boro). The major
Hills Darjeeling area (74%) is planted with wet-season rice
Terai Jalpaiguri and Coochbehar
Plateau Purulia (aman), followed by dry-season boro (1 8%) and
Lower Gangetic Plains prekharif aus (8%). The dry-season rice grows
Old Alluvium North Dinajpur, South
Dinajpur. and Malda under irrigated conditions, while major area
New Alluvium Murshidabad. Nadia. during prekharif and kharif are rainfed (Table
24-Parganas (North),
Hooghly, and Burdwan 2).
Lateritic Birbhurn, Bankura, and In the wet season, 32% of the rice area is
Midnapore (West)
irrigated. Of the remaining area, which is
Coastal saline 24-Parganas (South),
Midnapore (East), and rainfed, 52% is lowland and 16% is flood-prone.
Howrah In the dry season, irrigated area consists of 30%
upland (Table 3). Rice yield varies widely across
Table 2. Rice harvested area by season in West Bengal, seasons and ecosystems in different agroclimatic
India, 1996-97.
zones in West Bengal (Table 4).
Season Area
(million ha)
Growth and variability in rice production
Autumn (aus) rice 0.462
Winter (aman) rice 4.282 The annual compound growth rate of area,
Summer (boro) rice 1.056
Total rice 5.800 productivity, and production of rice by

165
 Table 3. Distribution of rice area (as percentage) by culture registered growth of 2.65%, with production
and season in West Bengal, India, 1997.
growth of 3.46%. The maximum production and
Rice culture Wet season Dry season productivity growth came from the Old
Irrigated 31.7 69.6 Alluvium region. followed by the New Alluvium
Rainfed 68.3 30.4 and coastal saline regions. Table 6 shows the
Lowland 52.5 -
Flood-prone 15.8 - growth rate in harvested area, productivity, and
Upland - 30.4 production (by district).
Table 7 presents the instability in rice
agroclimatic zone revealed a differential pattern harvested area and productivity at the district
of growth (Table 5). During the last one decade level from 1986-87 to 1996-97 as measured by
(1986-87 to 1996-97), the growth in rice the coefficient of variation (CV). Based on the
harvested area was only 0.79% in the State. aggregated CV (area and productivity), West
However, the harvested area in the Hills, Terai, Bengal can be broadly classified into two risk
and Old Alluvium regions has declined as levels. The districts having a CV of harvested
farmers diversified to other crops. Overall area more than 3% and the yield CV of more
productivity in the state during this period than 7% have been defined as high-risk areas.

a
Table 4. Rice productivity (t ha-1) by ecosystem and agroclimatic zones in West Bengal, India, 1997.

Irrigated Rainfed Total

Agroclimatic zone
Wet Dry Upland Lowland Flood-prone

Eastern Hills and Plateau

Hills 2.9 4.0 2.4 - - 2.8
Terai 3.9 4.6 2.5 2.6 2.5 2.9
Plateau 3.0 4.0 2.6 2.8 - 2.9

Lower Gangetic Plains

Old Alluvium 3.4 4.6 2.5 2.8 1.9 3.3
New Alluvium 3.6 4.7 2.5 2.9 2.2 3.5
Lateritic 3.4 4.7 2.5 2.9 2.1 3.2
Coastal 3.6 4.7 2.6 2.9 2.4 3.4

West Bengal 3.5 4.7 2.5 2.9 2.3 3.3

a
In terms of rough rice.

Table 5. Annual average compound growth rate of area, Table 6. Annual average compound growth rate of rice area,
productivity, and production of rice by agroclimatic zones productivity, and production during 1986-87 to 1996-97.
in West Bengal during 1986-87 to 1996-97.
Growth rate (%)
Growth rate (%) District
Agroclimatic zone Area Productivity Production
Area Productivity Production
Jalpaiguri -1.12 2.17 I .03
Eastern Hills and Plateau Dinajpur (N&S) 0.12 4.34 4.47
Hills -3.23 1.95 -1.35 24-Parganas (N) -0.11 2.38 2.27
Terai -0.92 1.98 1.04 Burdwan 1.61 2.04 3.68
Plateau 1.28 1.22 2.52 Midnapore (W) 1.57 1.90 3.50
Midnapore (E) 1.3: 2.87 4.29
Lower Gangetic Plains Malda -0.40 4.54 4.12
Old Alluvium -0.05 4.39 4.33 Murshidabad 0.24 4.38 4.64
New Alluvium 0.96 2.64 3.63 Nadia 1.09 2.57 3.68
Lateritic 1.42 1.99 3.44 Hooghly 1.54 2.23 3.80
Coastal saline 1.33 2.58 3.94 Bankura 1.61 3.10 4.76
Purulia 1.28 1.22 2.52
West Bengal 0.79 2.65 3.46 Darjeeling -3.23 1.95 -1.35
Coochbehar -0.74 1.84 1.09
Sources of data: Directorate of Agriculture (various issues) 24-Parganas (S) 1.51 3.42 4.98
Howrah 0.60 -0.78 -0.18
Birbhum 0.97 0.99 1.97
West Bengal 0.79 2.65 3.46

166
Table 7. Coefficient of variation (CV) of area and Table 9. Harvest prices of rice, in West Bengal, India, 1980-
productivity of rainfed rice from 1986-87 to 1996-97. 81 to 1995-96.

Coefficient of variation (%) Year Harvest price a Real price

District (Rs t-1) (Rs)
Area Productivity
1980-81 2,104
Darjeeling 10.11 14.28 1985-86 3,169 2,758
Jalpaiguri 2.44 11.60 1990-91 4,669 3,686
Coochbehar 5.69 5.35 1995-96 7.584 5,147
Dinajpur (N & S) 1.72 8.24
a In terms of rough rice. Sources: Farm Household Surveys, Evaluation
Malda 4.26 6.84
Murshidabad 4.75 8.51 Wing, Directorate of Agriculture, Government of West Bengal.
Nadia 3.09 7.17
24-Parganas (N) 1.13 8.62
24-Parganas (S) 3.35 12.05 Table 10. Yield loss caused by abiotic stresses in rainfed
Howrah 7.17 12.25 rice (kharif) a in West Bengal.
Hooghly 4.89 5.25
Burdwan 2.79 3.71 Kharif rice
Birbhum 5.07 6.41 Abiotic
Bankura 3.48 3.75 stress Probability Production loss Av yield
Purulia 3.17 6.64 of in affected loss
Midnapore (W) 1.78 7.91 occurence area (kg) (kg ha-1)
Midnapore (E) 2.41 10.01
Drought
West Bengal 1.45 4.62 At seedling stage 0.35 541 189
At vegetative stage 0.46 408 188
At anthesis 0.35 682 239

Table 8. Classification of district by risk level in West Submergence

Bengal, India. At seedling stage 0.40 345 138
At vegetative stage 0.44 467 205
Risk levela Districts At anthesis 0.38 615 234

High 1. Dajeeling 2. Murshidabad Cold

3. Nadia 4. 24-Parganas
(South)
5. Howrah
Moderate to low 1. Coochbehar 2. Jalpaiguri
3. Dinajpur (N & S) 4. Malda
5. 24-Parganas 6. Purulia
(North)
7. Midnapore (West) 8. Midnapore
(East)
9. Hooghly 10. Burdwan
11. Birbhum 12. Bankura
a CV of harvested area >3% and CV of productivity more than 7% =
high: if otherwise = moderate to low.
districts not falling in this category are
considered moderate to low-risk areas. Of 17
districts, five have been identified as high-risk
and the rest moderate to low risk (Table 8).
Output prices of rice also vary over the
years. Output prices have increased more than
260% during last 15 years. However, a sharp
increase in output prices (62%) occurred from
1990-91 to 1995-96 (Table 9). The sharp rise in
input prices, particularly labor wages and
fertilizer, as well as the increased demand for
rice contributed to the increase in output prices.
Risk in rainfed rice has mainly been
analyzed on the basis of yield losses from
At anthesis 0.15 726 109
Cyclone/strongwind 0.31 837 260
a In terms of rough rice. Source: Farm Household Survey. Evaluation
Wing, Directorate of Agriculture, Government of West Bengal.
various abiotic stresses. Estimates of yield losses
were taken from the household survey
conducted in 1997 (Table 10). Among the
abiotic stresses, drought at the seedling and
anthesis stages caused a severe yield loss.
Submergence at vegetative and anthesis stages
also contributed to yield losses. Cold
temperature at the anthesis stage in late-planted
aman rice also resulted in a substantial yield loss
in flood-affected areas. Cyclones/strong winds
in the coastal areas are considered major causes
of yield loss in rainfed rice.
In the monocropped rainfed rice area,
changes in land use pattern took place over the
decade. Exploitation of surface water and
groundwater through shallow tubewells using
backfeed river tide water through canals,
particularly in the coastal part, contributed to a
rapid shift to boro rice cultivation. Boro rice is
more productive and its share in the total rice
production of West Bengal has increased over

167
time, thus helping stabilize production
somewhat, as it takes advantage of the early
premonsoon rains. This practice also minimizes
irrigation cost.
Managing risk
Rainfed rice farmers generally adopt certain
risk-coping mechanisms to obtain the minimum
grain yield under varying levels of risks. Some
of these are adaptations to particular
characteristics of the ecosystem that do not
change from year to year. Moisture stress in
uplands, water stagnation and submergence in
lowlands are examples of such characteristics.
The farmer's management strategy to cope with
uncertainties of rainfall and abnormal flooding
may be considered as an adaptation to risk. One
of the risk management strategies is to grow
varieties suitable to specific environmental
conditions (Table 11).
Rainfed lowlands
Rainfed lowlands are distributed mainly in
Gangetic floodplains of the state. Rainfall varies
between 1,300 and 1,600 mm with 80%
precipitation occuring from June to October.
Intermittent flash flooding, and sudden
submergence/water stagnation are the risk
factors associated with heavy precipitation,
causing total or partial damage to the established
crop. These contribute substantially to yield loss.
Nursery sowing in different dates (so that
farmers can replant after floods) and the use of
overaged rice seedlings are some of the risk-
coping mechanisms used (Table 12). Double
transplanting/splitting of tillers from the crop
that survived is a compensatoty strategy.
Table 11. Varietal management for environmental stress
condition.

Rainfed uplands Varietal management Rice varieties that can

option cope with isk

The risk-prone unfavorable uplands of West 1. Extra early duration Aditya, Lalat, Ananda, Sneha.
Bengal are undulating red and lateritic soils of rice varieties for upland Sati, Jhular, Satia, Rasi

Midnapore (West), Bankura, part of Birbhum, 2. Early duration rice Heera, Latat, IET4786, IR36
and Burdwan districts. Rainfall in these areas varieties for preflood
harvest
varies from 1,125 to 1,410 mm spread over 90-
100 d (mid-June to September) with a short 3. Long duration Pankaj, Swarna, Bipasa,
drought spell in between. Unlike upland farmers submergence tolerant Suresh, Biraj, Jogen
varieties for flash-flood
in the adjacent states of Bihar and Orissa, areas (30-50 cm
farmers in these areas do not practice mixed water depth)

cropping during kharif, but they prefer to 4. Varieties for deep
transplant a sole crop of drought-tolerant early- flooding/stagnant
water areas
duration rice varieties. Farmers themselves cope
with risk by adjusting the establishment of 5. Saline tolerant varieties
for coastal areas
nursery bed at different dates to match the onset
of rain. But nursery sowing cannot be extended 6. Varieties for flash
flood areas
beyond 15-20 d from the optimum time (early
June) since the distribution period of rain is
short and delayed planted rice fails to produce
7. Boro-floating rice
grain. In such cases, farmers have to abandon integration for proper
kharif rice cultivation. This happened in 1998 stand establishment of
floating rice before
kharif, when 70% of the upland area was not arrival of flood in
planted to rice. The rainfall figures for June and flood-prone areas
July of 1998 were 58% and 43% below the
average of 1992-97.
Sabita, Dinesh, Purnendu.
Jitendra
Mohan, Utkalprava, Suresh,
SR-26B, Non-bohra
A mixture of aus and aman rice
varieties to ensure harvest of at
least a single crop, depending
on early and late flood
Boro harvest release land late
for floating rice establishment.
Seeding floating rice in boro
crop improves stand
establishment.

168
Table 12. Managing risk in rainfed rice culture in West Bengal, India.
Rainfed rice culture Risk element
Upland
Broadcasting Drought at different stages
of crop growth
Transplanting Soil moisture stress at
reproductive stage
Lowland
Flash flood Intermittent flooding damage:
the established crop in
different stages, resulting
in yield loss
Submergence/water Reduction in plant population
stagnation and thereby loss of yield
Flood-prone Total damage of rice plant-
following deep flooding
Coastal flooding Salinity reduces grain yield
Risk management
I. Use of high seed rate
2. Sowing very early
duration rice varieties
1. Use of short duration
rice variety
2. Establishment of
Nursery bed at different
time to match on set of rain
1. Growing very early rice
variety and harvest it
before onset of flooding
2. Growing a mixture of
Aus and aman types to
ensure at least harvest of
a single crop, depending
on early or late flood
3. Nursery sowing on
different dates to enable
replanting following flood
damage. Double transplanting/
splitting of tillers from surviving
crop to compensate for
the damaged area
4. Sowing of extra early
rice varieties/photoperiod-
sensitive varieties in
postflood regime
1. Using long-duration
submergence-tolerant varieties
2. Advancement of planting
with the help of subsurface water
3. Planting of overaged seedlings/
split tillers to cope with complete or
partial submergence
1. Use of flood-tolerant
variety
2. Proper land preparation
for uniform germination
3. Proper stand
establishment before
flooding through application
of bone meal, farmyard
manure, and ash
4. Shift to boro rice
cultivation in flood-free
dry season
5. Boro-floating rice
integration
1. Planting of salinity-
tolerant varieties
2. Transplanting of
overaged seedlings in
submerged soil
3. Extensive rice-fish cultivation
4. Planting of boro rice
with backfeed water
Effect
1. Better plant population
density. Terminal drought may
worsen drought effect
2. To avoid soil moisture stress
in shorter rainfall span
1. To avoid soil moisture stress
in reproductive stage
2. To compensate early
drought loss
1. Grain yield security and
avoidance of flood damage
2. Lessening the early or late
flood damage and ensuring
grain yield of either rice crop
3. Proper crop establishment
and higher land coverage in
receeding floodwater
4. Use of residual soil moisture
to obtain grain yield
5. Early crop establishment to
reduce flood and
submergence damage
6. Enhance survival
percentage and maintenance
of a good population density
1. Better grain yield
2. Better crop establishment
and proper plant population
stand
3. Lighter soil and early vigor
of rice plant
4. Minimized environmental
hazards, assured higher grain
yield and economic returns
5. Early establishment of
floating rice to minimize
flooding damage
1. Higher grain yield
2. Better crop establishment
3. Maximization of land use
and higher economic returns
using natural resources
4. Higher grain yield and
economic returns using low-
cost irrigation water
169
 Flood-prone land
Deep flooding causes total damage to rice.
Farmers do not have any risk management
practices to minimize grain loss. But fish culture
with floating rice is an adaptation to cope with
the risk of economic loss.
Changes in land use pattern to reduce
perennial risk in such a fragile environment as
deep flooding have been occurring in West
Bengal for more than a decade. Instead of
growing risky floating rice, farmers grow boro
rice in deepwater as the crop during the flood-
free period is more assured. This shift has
enabled farmers to meet their domestic
consumption and reap good returns .
Table 12 summarizes the risks involved in
rainfed rice cultivation under different stress
situations and farmers’ strategies to cope with
them. The magnitude of risk in the rainfed rice
ecosystem in West Bengal, as analyzed in this
paper, emphasizes the need for appropriate
management practices to combat stress
situations.
Concluding remarks
While the expansion of tubewell irrigation and
the shift to boro rice have led to a rapid growth
in rice productivity and stabilization of rice
production in West Bengal, the following
priority areas need to be addressed to further
improve rice production.
1. Develop appropriate location-specific rice
varieties to combat stresses in rainfed rice
culture.
2. Identify appropriate agronomic practices
that are economically viable and socially
acceptable.
3. Develop a suitable technology for raising a
nonrice crop with upland rice culture to
reduce risk.
4. Intensify a crop substitution program, in
which a crop of wet-season floating rice is
converted to a crop of dry-season irrigated
rice.
5. Assess farmers’ resource management
practices, the adoption and economic
viability of improved technology, and their
extrapolation domains and ex ante impact on
income distribution and poverty.
170
References
Directorate of Agriculture, Government of West
Bengal. Estimates of area and production of
principal Ccops in West Bengal, 1986-87 to
1996-97.
Directorate of Agriculture, Government of West
Bengal. Harvest prices of crops.
Directorate of Agriculture, Government of West
Bengal. Land use statistics of West Bengal.
Discussion
Question: Have you examined the cost of risk
management strategies in flood-
affected areas?
Answer: Not really, but these are crop
management practices (variety, gap
filling by splitting of tillers) that do
not involve much cost.
Question: How have you actually classified into
high, and low risk areas and what are
the possible strategies to minimize
risk?
Answer: The classification of areas is on the
basis of coefficient of variation of
area and productivity estimated for
the last decade. Availability and
certainty of irrigation can largely
explain these variations. For
example, high risk areas are subject
to moisture stresses at different
stages of crop growth due to
inadequacy of irrigation.
Comment: Instead of analyzing in terms of
broad, subjective groups of risk level,
it would be better if you could
analyze risk as a continuous variable
(CV of yield) in relation to variables
such as irrigation, fertilizer.
diversification, etc.
Notes
Authors’ addresses: N. Saha, Directorate of
Agriculture (Evaluation), West Bengal; S.
Bardhan Roy, economic botanist-III, West
Bengal; U. Aich, Directorate of Agriculture
(Agricultural Statistics), West Bengal.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

171
Risk and rice production in Orissa, eastern India
D. Naik, S. Pandey, D. Behura, and R. A. Villano

Orissa is an important rice-producing state in eastern India. Flood and drought are the major
sources of risk that constrain growth in rice productivity in Orissa. This paper analyzes the
nature and magnitude of risk in rice production there. Both district- and farm-level data are
used. The analysis of district-level data showed that the average rice yield is positively
correlated with the adoption of modern varieties. However, the variability of rice yield is not
correlated with the adoption of modern varieties. The differences in variability across districts
could be attributed mainly to soil/climatic factors but not to modern technology. Overall, the
variability of rice production has changed little, except in coastal districts where variability has
increased. Farm-level data showed various types of coping strategies used by farmers to
deal with risk. Opportunities for reducing risk by manipulating crop management practices
appear circumscribed by hydrological factors in the flood-prone village studied. Diversified
sources of income in such a village may have helped stabilize household income. The share
of rice income in the total household income was low, indicating that stabilization of rice yield
per se will not generate a substantial economic advantage. Rice technologies that produce
higher yield on average while reducing the chances of crop failure are needed to improve the
performance of the rice economy.

Orissa is an important agricultural state of
eastern India. It is predominantly an agricultural
state with nearly 86% of its total population of
35 million residing in rural areas. Farmers and
agricultural labor account for 73% of the
economically active labor force in the state.
Rice is an important crop of Orissa, where it
is grown on about 4.5 million ha annually. It
accounts for more than 89% of the total area
under cereals and contributes to about 93% of
total cereal production. The average productivity
of rice in 1995-97 was 1.89 t ha". Almost 75%
of the total area under rice in Orissa is rainfed.
Uplands account for 21 % of the rainfed area. For
1969-97, rice production in Orissa increased at
the compound growth rate of 2.03% per year.
The compound growth rate in yield for the same
period was 2.01%. The population growth rate
for the state during 1981-91 was 1.84% per
annum. Thus. the growth rate in rice production
has been just adequate to maintain the current
consumption of about 157 kg of milled rice per
capita. As the predominant rice ecosystem in
Orissa is rainfed, rice production is subject to the
vagaries of the monsoon and reflects a high level
of yield and production instability (Fig. 1). The
majority of farmers who are very poor may lack
incentives and the capacity to invest in
productivity-enhancing technology because of
high risk.
This paper analyzes the nature of risk in rice
production in Orissa and draws out implications
for technology design and policy improvement
to help farmers better manage climatic risk in
rice production. Although the risk associated
with uncertainty in prices may also be important
to some farmers, this paper focuse on climatic
risk and how farmers have adapted to it.
Data and methods
The analysis of production variability in Orissa
is based on district-level, time-series data (1969-
97) for the state. These data were obtained from
the official publication of the Government of
Orissa. Although more districts were created in

173
 199 1 by subdividing several districts, the data
were grouped according to the original districts.
Growth rates were calculated by fitting a
semilogarithmic trend equation and the
coefficients of variation (CVs) were estimated
using linearly detrended data. Using these
district-level data, attempts were made to
explain the cross-district differences in
variability of rice area, yield, and production.
To analyze the change in instability over
time, the district-level, time-series data were
divided into two periods of equal length—1969-
8 1 and 1982-94. The data on area and yield for
each period were linearly detrended and the
detrended data were centered on their respective
means. Detrended yield and detrended area were
multiplied to obtain detrended data on
production. The coefficients of variation of area,
yield, and production for these two time
segments were compared to assess the nature of
changes in variability. A variance decomposition
analysis developed by Hazell (1982) was used to
identify the components that have contributed
the most to the change in variance of production.
174
The district-level analyses were
complemented by farm-level analysis of coping
mechanisms. Collection of panel data for
analyzing farmers’ risk-coping mechanisms
began in 1996. Two villages, Taraboi and Thailo,
were selected for the study. Taraboi belongs to
Khurda District, whereas Thailo is in
Jagatsinghpur District. Taraboi is an inland
village that is less prone to submergence than
the coastal village Thailo. Thus, production
systems in the former serve as a benchmark
against which the nature of risk and risk
management practices of farmers in the latter
can be analyzed. Sixty-five farmers from
Taraboi and 70 from Thailo were included in the
sample. Data collection began in Taraboi in 1996
and in Thailo in 1997. As comparative data for
both villages were available for 1997 only, the
analysis reported in this paper was based on
1997 data. Data for 1998 and 1999 were not
included in the analysis as these are being
processed. Because data for only one year were
used, discussion of risk and risk management
touches only on the broader aspects.
 An adequate analysis of risk adjustment Table 2. Growth rates of area, yield, and production of rice
in Orissa.
mechanisms requires data other than those
reported in this paper. Nevertheless, some Item 1980-97 1969-97
a

broader features of adjustment mechanisms can Autumn rice

be discerned. Adjustment mechanisms can be Area -0.62**
Yield 2.47
grouped into two types: ex ante and ex post. The Production 1.85
former refers to strategies used to reduce
Winter rice
production and income risk, whereas the latter
Area 0.67***
refers to those that prevent a drastic reduction in Yield 2.13**
consumption when losses do occur. These Production 2.80***

strategies were elicited during the interview Summer rice

process. Area 2.80***
Yield 2.19***
Production 4.99***
Results and discussion
Total rice
Area 0.51** 0.02
District-level analysis Yield 2.34*** 2.01***
Production 2.85*** 2.03***

Rice is grown in Orissa in autumn, winter, and a

Rice data, by season, only available starting from 1980. ***.** significant
at 1% and 5% level, respectively.
summer. Autumn, winter, and summer rice
accounted for 19%, 76%, and 6% of the total
rice area, respectively, in 1995-97 (Table 1). years. At least a part of the increase in the
Their respective contributions to total output productivity of autumn rice is attributed to the
were 12%, 78%, and 10%. Winter rice, grown replacement of autumn rice in more marginal
during July-November, predominates in Orissa. areas by these crops.
Autumn rice is mostly grown in the rainfed The area under winter rice was 3.3 million
upland area and is established by direct seeding. ha in 1950, but increased marginally to 3.4
Although the area under autumn rice expanded million ha in 1997. The compound growth rates
from about 0.5 million ha in 1950 to about 1 of area, production, and productivity of winter
million ha in 1985, it has now shown a declining rice were 0.67%, 2.8%, and 2.1396, respectively.
trend. The compound growth rates of area, Thus, growth in the production of winter rice
production, and productivity of autumn rice was driven mainly by growth in productivity.
from 1980 to 1997 were estimated to be -0.62%, Summer rice is grown mostly in the irrigated
1.85%, and 2.47%, respectively (Table 2). The areas of Balasore, Bolangir, Puri, Cuttack, and
reduction in autumn rice area was mainly due to Sambalpur. Production in Orissa grew at almost
substitution by pulses, oilseeds, and fruit crops, 5% per year, with the contribution of area
which have become more profitable in recent growth (2.8%) being slightly higher than that of
yield growth (2.2%). In spite of a strong growth
performance, the crop is of minor importance as
Table 1. Relative importance of various rice cultures in its share in total area and production of Orissa is
Orissa. still quite small.
Item Season 1980-82 1990-92 1995-97 Overall Balasore, Cuttack, Koraput, Sarnbalpur, and
average Puri are the five major rice-producing districts of
Share of rice area (%) Orissa. These districts together accounted for
Autumn 21 20 19 21 53% of the area and 57% of the production
Winter 75 75 76 74
Summer 4 5 6 5 during 1995-97. Over the period 1969-97,
Cuttack, Dhenkanal, Ganjam, and Mayurbhanj
Share of production (%)
Autumn 14 14 12 13
exhibited a declining trend in rice area (Table 3).
Winter 79 77 78 79 Growth in rice productivity was higher in
Summer 7 9 10 8
Sambalpur (2.58%) and Balasore (2.54%).

175
Table 3. Growth rates of rice area, yield, and production in was highly correlated with percentage area
Orissa, 1969-97.
under modem varieties (Fig. 2),. indicating that
District Area Yield Production further spread of modem varieties is needed to
Balasore 0.23** 2.54*** 2.78*** raise yield in districts where adoption has been
Bolangir 0.47*** 2.27*** 2.74*** limited for a variety of reasons.
Cuttack -0.40** 2.09*** 1.70***
Dhenkanal -1.34*** 2.03*** 0.69
For Orissa, the coefficients of variation of
Ganjam -0.52** 2.42*** 1.89** area, yield, and production for the period 1969-
Kalahandi 0.75*** 1.19** 1.94***
97 were estimated to be 4%, 15%, and 17%,
Keonjhar 0.13 1.11** 1.24**
Koraput 0.32* 1.93*** 2.25*** respectively (Table 4). Variability of yield was
Mayurbhanj -0.02*** 1.33 1.31*** quite high relative to that of other states such as
Phulbani 1.56*** 2.02*** 3.57***
Puri 0.14 1.61*** 1.74*** Assam and West Bengal, which had yield CVs
Sambalpur -0.03 2.58*** 2.56*** of less than 10%. The CVs of yield in Bolangir,
Sundergarh 0.12 0.33 0.45
Orissa 0.02 2.01*** 2.03*** Dhenkanal, Ganjam, Kalahandi, Phulbani, and
Puri exceeded 20%. The scatter diagram (Fig. 3)
a***,**,*= significant at 1%. 5%. and 10% level, respectively.
indicates no clear relationship between district
yield CV and district mean yield. As winter rice
Overall, most districts have been able to is the dominant crop in all districts, variations in
maintain a productivity growth of around 2% per CV probably reflect climatic fluctuations that
year, except for Kalahandi (1.19%). Keonjhar characterize winter rice production in Orissa.
(1.11 %), Mayurbhanj (1.33%). and Sundergarh To examine whether instability of yield
(0.33%). These districts are characterized by a across districts is related to the adoption of
high incidence of poverty, poorer infrastructure, modem varieties, the CV of district-level yield
and less fertile soils, and are inhabited mostly by for 1982-94 was regressed on the mean
scheduled tribes. Autumn rice accounts for a percentage area under modem varieties for the
higher proportion of total rice area in these same period. The result indicates a poor
districts. The average district-level rice yield correlation between these two variables (Fig.

176
Table 4. Mean and coefficient of variation of rice area, yield, regression of yield CV was run with percentage
and production in Orissa, 1969-97.
growth of yield as the explanatory variable. The
Coefficient of growth rate of yield is expected to be higher in
Mean variation
District
districts where modem technologies have been
Area Yield Pro- Area Yield Pro- adopted rapidly. Thus, growth rate of yield can
(000 (t ha-1) duction (%) (%) duction serve as a proxy for the adoption of modem
ha) (000 t) (%)
technologies. This regression also produced a
Balasore 416 1.54 643 4 18 19
statistically insignificant slope coefficient (Fig.
Bolangir 307 1.58 490 4 21 23
Cuttack 575 1.68 964 7 17 19 4B), indicating that variations in CV across
Dhenkanal 266 1.49 388 9 25 26 districts cannot be attributed to modem
Ganjam 323 2.02 652 8 28 31
Kalahandi 298 1.25 376 6 21 24 technologies.
Keonjhar 211 1.35 287 5 19 22 For Orissa as a whole, the mean area, yield,
Koraput 395 1.57 624 7 15 18
Mayurbhanj 336 1.49 498 4 15 15 and production of rice changed in the second
Phulbani 102 1.53 162 9 23 29 period (1982-94) relative to the first period
Puri 395 1.78 707 5 20 23
Sambalpur 546 1.80 986 6 15 18
(1969-81) by -1%, 35%, and 33%, respectively.
Sundergarh 219 1.22 266 7 17 18 All districts showed an increase in average yield,
All Orissa 4,387 1.60 7,043 4 15 17
with the increases being more pronounced in
Bolangir (43%), Ganjam (61%), Phulbani
4A). Regression of the CV of yield on the (40%), and Sambalpur (43%). Although
percentage area irrigated and the percentage area Phulabani experienced a major increase in area
under modem varieties also produced (27%), Cuttack (9%), Dhenkanal (20%), and
statistically insignificant coefficients. As data on Ganjam (8%) had a decline. The changes in area
area irrigated and area under modem varieties in other districts were quite small.
may be somewhat less reliable, a second

177
 The variance of rice area declined slightly
(by 39%) between 1969-81 and 1982-94, but
this decline was not statistically significant.
Yield and production variance increased by 67%
and 79%, respectively, but these increases were
also statistically insignificant. Overall, the
changes in variance of area, yield, and
production at the state level have been small. At
the district level, area variance in most districts
declined, with Ganjam being the only district
178
where the area variance increased by 280%. The
picture is that of a greater stability in area
planted in most districts in the second period
than in the first. Yield variance increased in most
districts but only Ganjam (275%) and Pun
(3 13%) registered a statistically significant
increase. Thus, Ganjam is the only district in
which both area and yield variance increased
between the two periods. As a result, production
variance in this district increased by 346%.
Table 5. Decomposition of production variance in the state
of Orissa.
Description Percent
Change in mean yield 10.22
Change in mean area -1.08
Change in yield variance 72.36
Change in area variance -2.27
Change in area-yield covariance 26.65
Interactions and residual -5.88
Phulbani and Puri are the other two districts
registering a statistically significant increase in
production variance, 248% and 339%,
respectively.
The decomposition of change in variance
between the two periods indicated that almost all
of the changes in variance at the state level are
due to the change in yield variance and the
change in area-yield covariance (Table 5). These
two components accounted for 72% and 26%,
respectively, of the total change in production
variance. As the change in the area-yield
covariance depends partly on the change in yield
variance, the total contribution of the change in
yield variance will be higher than 72%. Thus,
the changes that are occurring in the rice
production systems of Orissa appear to have
increased production variance mainly through an
increase in yield variance. It should be bome in
mind, however, that the overall increase in
production variance for Orissa as a whole is
statistically insignificant. The destabilizing
effect seems to be concentrated mainly in the
coastal districts of Cuttack, Puri, and Ganjam.
What are the reasons for such large
variability, especially in the coastal zone? The
adoption of modem rice varieties in these
districts increased rapidly, with the area under
modern varieties in 1997 being more than 80%.
These districts also have relatively more area
under irrigation (38-52% of gross cropped area).
However, Sambalpur, which also has a high rate
of adoption of modem varieties (>80%) and a
higher proportion of irrigation (>50%), has
recorded very little change in variance. Thus, the
adoption of varieties cannot by itself explain
changes in production variability between the
two time periods. Other interacting factors must
have brought about changes in production
variability. The increase in production variance
in the coastal belt is probably due to the spread
of modem varieties in areas with poorer quality
of irrigation and drainage and higher frequency
of flooding. The supply of irrigation in the
coastal belt has also become less reliable due to
inadequate repair and maintenance of irrigation
canals. Sambalpur, on the other hand, has a
relatively assured source of irrigation. Thus,
interactions between modem varieties and
hydrological fluctuations in the coastal belt
could be a major reason for increased production
instability in this belt.
Analysis of farm-level data
The long-term rainfall patterns for the two study
districts were similar (Fig. 5). Despite these
similarities, submergence is more common in
Thailo due to its low elevation and proximity to
the coast. Jagatsinghpur received very high
rainfall in June and July 1997 (Fig. 5), causing
massive flooding and destroying almost its
entire rice crop for the year.
Information on various sources of risk was
elicited from farmers. The results indicate that
the probability of flood in Thailo is quite high
(44%) (Table 6A). As strong winds are often
associated with heavy rains, the probability of
flood occurrence in Thailo may be even higher.
Taraboi has no single dominant source of risk.
Several sources contribute to overall risk in
Taraboi, although each has a relatively low
probability of occurrence.
Table 6B shows farmers’ estimates of the
probabilities of two levels of losses. Again, in
Thailo, the probability that more than 50% of the
output will be lost due to submergence is 27%.
This provides an indication of the severity of
flood risk. Overall, the probability of production
loss being greater than 50% from different
sources of risk is lower in Taraboi than in
Thailo. Although the elicited probabilities
presented above approximate the marginal
probabilities of each stress event, more than one
stress event may occur within the same growing
season. Such joint occurrences can result in even
greater losses to farmers.
Although the average farm size is similar,
the degree of fragmentation of landholding is
greater in Thailo than in Taraboi (Table 7). In
179
Table 6A. Incidence (%) of stresses.
Thailo, farmers have as many as 22 plots per
Nature of stress Taraboi Thailo household. The average plot size is also much
Strong wind 12 24 lower in Thailo than in Taraboi. Although land
Flood/submergence 7 44 fragmentation can help reduce the overall
Drought 11 10
insects 10 10 production risk, the available data do not permit
Diseases 7 us to judge the extent to which risk reduction is
a motive for land fragmentation in the study
Table 6B. Farmers’ estimates of probabilities (%) of yield villages. A distinct agrarian feature of the study
losses.
area is a relatively high proportion of rented-in
Taraboi Thailo land among marginal farmers (30-35%).
Nature of stress In term of rice area, lowland fields where
60% >50% 40% >50%
submergence is a common problem are
Strong wind 8 4 10 14 proportionately more important in Thailo (53%)
Flood/submergence 5 2 17 27
Drought 6 5 7 3 than in Taraboi (28%). The distribution of
insects 9 1 9 1 various types of fields across households of

180
Table 7. General characteristics of the surveyed villages.

Taraboi Thailo
Characteristic
Marginal Small Large All farms Marginal Small Large All farms

No. of households 29 22 14 65 37 19 14 70
Av area operated (ha) 1.18 1.48 3.03 1.68 0.91 1.62 2.82 1.48
Av owned area (ha) 0.72 1.34 2.86 1.39 0.67 1.48 2.82 1.32
Av area of parcel (ha) 0.27 0.38 0.49 0.36 0.11 0.1 7 0.23 0.1 5
Av no. of parcels/households 5 4 6 5 9 10 13 10
Minimum 1 1 2 1 1 1 6 1
Maximum 13 9 15 15 22 19 21 22
% area by land type
Upland 29 6 14 15 2 7 5 5
Medium land 29 65 72 57 41 40 45 42
Lowland 42 31 14 28 57 53 50 53

different size categories is similar in Thailo. In
Taraboi, the proportion of medium land is higher
among small and large farmers, while the
proportions of lowland and upland fields are
higher among marginal farmers.
As Thailo represents predominantly a
submergence-prone environment, dry seeding is
the most common method employed for
establishing rice in more than 95% of the area.
Farmers establish rice by dry seeding ahead of
rains, so that, by the time the area gets flooded,
the crop is tall enough to avoid serious damage.
Dry seeding in submergence-prone areas is a
common practice in South and Southeast Asia.
In Taraboi, the major crop establishment method
is dry seeding as it accounts for 80% of the rice
area. However, transplanting is also practiced,
especially in the medium land where
submergence is not a serious problem.
An interesting feature of the study villages is
the dominance of rice in the rainy season.
Because rice occupies almost 100% of the land,
no other crops are grown on any of the land
types. This limited diversification, even in the
uplands, is an indication that the overall
ecosystem is lowland, although farmers classify
fields with slight elevation as upland. Because of
excessive accumulation of water in the field,
opportunities for risk reduction through crop
diversification seem rather limited. Although
several crops are grown during the dry season,
almost half the area is left fallow in both
villages. The fallow land serves as grazing area
for cattle.
Modem varieties are adopted in only one-
third of the rice area in both villages. The
adoption of modem varieties is therefore far
below the state average of 68% for 1997.
Mahsuri and CR1009 are the two major
improved varieties grown in the study villages.
CR1009 is a medium tall variety of 155-d
duration and is suitable for lowland conditions.
Mahsuri, a 145-d variety, has become popular in
many parts of eastern India because of its good
grain quality.
Both villages showed a high degree of
varietal diversification with as many as 93
varieties grown by the sampled farmers. Varietal
diversity was higher in submergence-prone
Thailo. Rice varietal diversification indicates
environmental diversity as well as farmers'
mechanisms for coping with high risk. Farmers
attempt to reduce production risk by growing
several varieties with different characteristics so
that at least some production is assured. There
may be other reasons, however, for growing
several varieties such as staggering of labor use
and producing output of different quality (grain
and straw).
Submergence was a major problem that
severely affected rice production in Thailo in
1997. More than 90% of the crop was destroyed
due to submergence. Rainfall during July was
very high and resulted in widespread flood in the
village (Fig. 5). Land was mostly under water
and no other crops could be grown. As a result,
only a small proportion of the planted area could
be successfully harvested.
Rice yield averaged 1.8 t ha-1 in Taraboi but
almost zero in Thailo because of flood damage.
Crop production practices are similar in both
villages but flood damage resulted in Thailo

181
Table 8. Yield, cost, and return of rice in the surveyed villages, 1997.

Taraboi Thailo.
Item
Marginal Small Large All farms Marginal Small Large All farms

Yield (t ha-1) 1.8 1.7 1.9 1.8 0.0 0.0 0.0 0.0
Total cash cost (Rs ha-1) 3,429 4,619 4,445 4,058 1,213 1,619 1,872 1,455
Total gross return (Rs ha-1) 8,283 8,077 8,788 8,358 52 0 123 52
Net returns (Rs ha-1) 4,853 3,458 4,342 4,300 -1,160 -1,619 -1,750 -1,403

Table 9. Sources of income in 1997.

Taraboi Thailo
Source
Marginal Small Large All farms Marginal Small Large All farms

Total income (Rs household-1) 26.527 42,397 82,007 43,865 17,300 23,929 59.359 27,197
Share (%)
Rice 16 9 15 13 5 6 3 4
Other cropsa 2 2 2 2 7 11 20 14
Fruits and timber 0 1 1 1 0 1 1 1
Livestock and poultryb 4 6 3 4 17 15 8 13
Nonfarm labor 5 1 0 2 9 3 1 4
Off-farm labor 7 0 0 2 10 3 1 5
Other sector employment 44 64 62 58 42 39 43 41
Business 15 8 10 10 8 10 13 10
Pension /remittances 6 7 7 7 2 13 10 8
100

aIncludes sugarcane, mungbean, horsegram and vegetables. chili. and colocasia. lncludes sale of livestock and poultry and products such as milk.
b

farmers applying virtually no chemical
fertilizers. The average rate of application of N,
P, and K was 25, 1, and 13 kg ha-1, respectively,
in Taraboi. Overall, the net returns (gross returns
minus cash costs) were similar across farm size
categories and averaged Rs 4,300 ha-1 (Table 8).
The average farm household income in 1997
was Rs 44,000 in Taraboi and Rs 27,000 in
Thailo (Table 9). Although the average
operational holding was only 13% higher, the
farm household income in Taraboi was 62%
higher. The major part of this difference is not
due to income from rice or agricultural income
in general but to a substantially higher nonfarm
income in Taraboi. Even if farmers in Thailo had
obtained the same income from rice as Taraboi
farmers did, their total income would have been
only 17% higher.
Rice accounted for only 13% of the total
household income in Taraboi, with government
employment accounting for nearly 60% of the
total income. Although public- sector
employment was also a major source of income,
accounting for 40% of the total income, other
important sources of income in Thailo were
livestock and crops such as mungbean,
horsegram, and vegetables. Overall, the income
sources in Thailo are a bit more diversified than
in Taraboi, where public-sector employment is
the single major source of income.
With rice accounting for only about 13% of
the income, the effect of stabilization of rice
income on the stability of total household
income is likely to be small (Pandey et al 1999).
The contributions of rice income to total income
of small and marginal farmers are even smaller.
Thus, the usual argument that stabilization of
rice yield will benefit small farmers
proportionately more is untenable. Such farmers
are likely to benefit more from technologies that
increase the average rice yield than from those
that reduce the variability of rice around a given
mean yield. The current income structure also
highlights the need to improve the productivity
of other crops as well as to generate nonfarm
employment opportunities to raise the income of
these households.
The major ex ante strategies used to reduce
risk in rice production in the study area are ( 1)
resowing when the crop is damaged early in the
growing season, (2) reducing fertilizer
application when crop damage is anticipated, (3)
using transplanting as a fall-back strategy when
the dry-seeded crop is damaged or dry seeding is

182
Table 10. Ways of augmenting family income (% of farmers).

Taraboi Thailo
Item
Marginal Small Large All farms Marginal Small Large All farms

Nonfarm labor 34 10 7 2 65 22 36 47
Agricultural labor 24 14 15 49 22 21 36
Selling of animals 1 14 9 32 22 14 26
Borrowing
Bank 1 5 14 9 22 16 21 2
Other sources a 20 14 12 33 37 27
Others b 3 2 11 5 8
a
Includes friends and relatives, money lenders, traders, and big farmers. b
Includes mortgaging of jewelry and land and remittances.

not possible due to early rains, and (4) changing
the crop establishment method in the subsequent
year to transplanting when weed infestation is
high. Farmers in Taraboi, where submergence is
a less serious problem, changed crop
establishment methods from dry seeding to
transplanting (and vice versa) more often to
adapt to varying patterns of rainfall. High
incidence of submergence in Thailo constrains
opportunities for changing the crop
establishment methods in this village.
Opportunities for other kinds of adjustments
such as changes in rice varieties are also
constrained because of the need to dry-seed
fairly early in the season. Farmers in this village,
however, transplant late if the dry-seeded crop is
damaged. They use surplus seedlings from
neighboring villages for this purpose.
Income diversification is another strategy
used to reduce instability in household income.
As discussed earlier, income sources are more
diversified in Thailo than in Taraboi. Nonrice
crops and livestock are more important sources
of income in Thailo. However, income
diversification may also be the result of nonrisk
factors such as differences in resource base. The
single-year data, however, do not permit an
analysis of the stabilization effect of income
diversification.
When losses do occur, as they did in 1997,
reliance on income from nonfarm and
agricultural employment is a major coping
strategy, especially for marginal and small
farmers. In Thailo, 65% of the farmers relied on
nonfarm labor earning and 49% relied on
earning as agricultural labor (Table 10). In
Taraboi, these are also the major coping
strategies, but reliance on these strategies was
probably not so essential as crop losses were not
as severe. It is interesting to note that quite a
number of even the so-called “large” farmers in
Thailo resorted to nonfarm employment and
agricultural wages to supplement their income in
1997. While nonfarm employment can be an
important coping mechanism in times of stress,
employment as agricultural labor is less
effective in dealing with an income shortfall if
the adverse effect is spread over a large area as
demand for agricultural labor in the locality is
reduced, making it difficult to rely on this source
of income as a coping mechanism.
The other two major coping mechanisms are
borrowing money and selling assets. Farmers
borrowed money from both noninstitutional and
institutional sources as well as sold animals and
mortgaged land. The sale of productive assets
such as bullocks in these stress events may be an
important coping mechanism, but it can reduce
long-term productivity because of a long delay
in reacquiring the lost assets (Pandey et al 2000).
Concluding remarks
Despite the importance of rice in Orissa, the
average state-level yield has remained low and
its growth has been just enough to maintain the
current level of per capita consumption. Clearly,
rice productivity needs to be increased to ensure
food security and incomes need to be raised to
reduce poverty.
The adoption of modem varieties in Orissa
has increased over time and this has had a
positive impact on the average yield.
Fortunately, production variability does not
seem to have increased appreciably except in the
coastal belt. Increases in yield variance and the

183
 area-yield correlation seem to be the major
contributors of increased production variance
but these increases are not correlated with the
adoption of modem varieties.
Analysis of farm-level data indicates that
rice can be lost completely in some years due to
flooding. Obviously, the impact on poor farmers
of such a major loss can be catastrophic. But
nonfarm income and agricultural labor earnings
are important safety nets employed during these
stress years. Fortunately, diversified sources of
income have evolved over time, with nonfarm
income contributing a major source of livelihood
to most farmers. This has helped cushion the
adverse impact of stress events such as flood.
Policies that encourage further diversification of
income sources could play an important role in
reducing the impact of risk in rice production.
However, per capita growth of the state domestic
product of Orissa over the last decade has
remained quite low, thus limiting opportunities
for further income diversification.
The share of rice income in the total
household income was quite low. This implies
that stabilization of rice yield per se will
generate only a small economic benefit. What is
needed is to improve rice yield and to stabilize it
simultaneously. Poor soil fertility in several
districts of Orissa and rainfed environments
make the task of developing suitable
technologies challenging indeed. A more
thorough understanding of farmers' practices
and the features of technology that would best
suit these harsh environments can play a critical
role in this task.
References
Government of Orissa. Various years. Orissa
agricultural statistics. Orissa,
Bhubaneshwar: Directorate of Agriculture
and Food Production.
Hazell PB. 1982. Instability in Indian foodgrain
production. Washington, D.C.: International
Food Policy Research Institute.
184
Pandey S, Behura DD, Villano RA, Naik D.
2000. Economic cost of drought and
farmers' coping mechanisms: a study of
rainfed rice systems in eastern India.
Discussion Paper Series No. 39. Los Baños
(Philippines): International Rice Research
Institute. 35 p.
Pandey S, Singh HN, Villano RA. 1999. Rainfed
rice and risk coping strategies: some micro-
economic evidences from eastern India.
Selected paper for presentation at the Annual
Meeting of the American Agricultural
Economics Association, 8- 11 August 1999,
Nashville, Tennessee, USA.
Discussion
Question: Could you tell us the reasons for
increasing instability and growth in
rice productivity in Orissa?
Answer: Rice is grown in very diverse agro-
climatic conditions in Orissa. It so
happens that there are floods in some
areas and drought in other areas in
the same year. We have good
technology in medium lands that has
pushed up the yield. But there are
no suitable, high-yielding variety/
technology for the uplands and
lowlands. About 70% of the total
rice production in Orissa comes from
traditional varieties.
Question: Farmers are growing 30-40 varieties
in a year. Are these mostly officially
recommended or are these local
varieties?
Answer: In 1997, farmers grew about 45
varieties and almost 23 of them were
local. Further, seed replacement rate
was very low (2%) in Orissa, and
therefore, improved varieties grown
by farmers are not really good and
are losing seed vigor over time.
Notes

Authors’ addresses: D. Naik and D. Behura,

Orissa University of Agriculture and
Technology, Bhubaneshwar, Orissa, India;
S. Pandey and R.A. Villano, International
Rice Research Institute, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.

185
Risk and rice technology design
L.J. Wade

This paper considers approaches to quantitative risk assessment using experimental data
and crop simulation as a basis for discussing promising technology interventions and
pathways to adoption in rainfed lowland rice. Results from pattern analysis of genotype by
environment interaction are used to demonstrate that risk is not random, but there are
patterns of risk, and these can be quantified with cumulative distribution functions. Promising
technologies include reduction of percolation loss of water in northeast Thailand, rotation of
short-duration crops in northwest Bangladesh, use of short-duration cultivars with better root
systems and on-farm reservoirs to reduce the impact of drought, better cultivars and
improved nutrition to improve submergence tolerance, and use of weed-suppressive
cultivars with improved management in direct seeding. On-farm development of such
technologies is essential, with partnership among research, extension and farmers, so that
all can benefit from technical knowledge, understanding, and feedback. Because patterns
are repeatable, we do not need a new technology for every field. Our technologies should be
systems-based and suitable for local adaptation.

This paper is written with the philosophy that
risk is not fully random, but there are patterns of
risk. We should be able to identify those patterns
and use that knowledge in risk management. A
biologist’s perspective on quantitative risk
assessment using experimental data and crop
simulation is provided as a basis for considering
some technologies in the pipeline and some
issues in relation to adoption.
Results from research on genotype by
environment (G x E) interaction are used to
illustrate the approach for research and
technology transfer in rainfed lowland rice.
Quantification of risk is illustrated using
cumulative distribution functions for the effects
of different cultural practices on yield
expectations. Some promising interventions in
agronomy and plant breeding are considered for
rainfed lowland rice.
The paper concludes that targeted strategies
are needed for targeted environments. In this
approach, trait combinations and management
practices consistent with the critical
characteristics of the target population of
environments are more likely to be successful.
Our research in rainfed lowland rice
Drought stress is commonly considered the most
important limitation to yield in rainfed lowland
rice (Widawsky and O’Toole 1990).
Consequently, we commenced research on
drought tolerance at various levels of
integration. The core of the research was crop
physiology, to better understand plant response
to drought (Samson et a1 1995, Wade et a1
1997b). At a higher level of integration, G x E
interaction was used to integrate this
understanding of drought response with patterns
of adaptation of lines to target populations of
environments in the rainfed lowlands (Wade et
a1 1995, 1997a). Agronomic management
provides prospects for improving grain yield and
yield stability quickly, although the largest gains
are likely when cultivar and management are
manipulated together (Wade et al 1998a).
Consequently, we examined seedling vigor
(Douthwaite et a1 1995, Bhuiyan et al 1998) and
nutrient by water interactions (Wade et al
1998a,b).

187
An example for G x E interaction
To illustrate the principle that there are patterns
of response in relation to risk, let us consider the
results of Wade et al (1997a), who examined the
performance of 31 genotypes over nine locations
in the rainfed lowlands of Thailand, India, and
the Philippines in 1995. Pattern analysis was
used to group the responses of genotypes in
relation to different types of environment in
order to identify varieties with different patterns
of adaptation.
The analysis revealed that 48% of the
variation in yield response of the 31 genotypes
over the nine locations was due to site
conditions, 14% to the main effect of genotype,
188
and 38% to the G × E interaction. This illustrates
the challenge for plant breeders in trying to
develop better cultivars for variable and
heterogeneous rainfed environments; G x E was
three times the magnitude of G. Nevertheless,
there were clear and repeatable patterns in the
data.
Figure 1 presents a biplot of the G × E
interaction. Axis 1 accounted for 51% of the G ×
E sum of squares and axis 2 for 27%. The biplot
is a spatial representation of the associations in
the data, with sites shown as spokes from the
origin and genotypes shown as symbols. Groups
of genotypes with a common symbol are circled
to emphasize the similarity of their response
over environments. Where a genotype group
 maps close to a site, that indicates a preferential
adaptation to those conditions. Where a
genotype group maps to the opposite side, this
indicates a poor adaptation to those conditions.
The strength of the association is quantified by
the intercept between the environment spoke (or
its extension) and a perpendicular line to the
genotype. The further the intercept is from the
origin, the stronger is the association, and this
may be positive or negative.
For axis 1, the Philippine sites are to the left
and the Thai sites to the right (Fig. 1). For axis
2, the majority of sites were neutral, with
Phimae strongly positive and Raipur B strongly
negative. From knowledge of the site conditions,
Wade et a1 (1997a) interpreted axis 1 as general
site favorability, with the low-fertility and
drought-stressed Thai sites of Ubon and Chum
Phae to the right and the more fertile Philippine
sites with favorable hydrology to the left. Raipur
A was intermediate between those extremes,
whereas the late-planted Raipur C, where
drought was severe, mapped closer to Ubon and
Chum Phae. Wade et al ( 1997a) noted that the
crop at Phimae was fully submerged at
flowering, whereas the crop at Raipur B had
favorable conditions early, followed by fast-
onset late-season drought. Consequently, axis B
was interpreted as indicating significant
fluctuations in the water regime later in the
season, with either too much or too little water.
Responses of genotypes may be interpreted
relative to these site conditions. The group
comprising CT9897 and several semidwarf IR
lines was preferentially adapted to the more
favorable conditions occurring at the Philippine
sites, whereas Sabita and KDML105 were better
adapted to the drought conditions of Ubon and
Chum Phae. The group comprising several
breeding lines from IR66516 was better adapted
to submergence, whereas NSG19 was better
adapted to fast-onset drought. Groups including
Mahsuri and IR99879 were more neutral and
more stable over environments.
Plant breeding and agronomic
philosophy
What adaptive strategy is desirable for the best
cultivar? Do you choose a cultivar with high and
stable yields over many environments, a strategy
referred to as general adaptation? Or do you
choose the highest yielding cultivar in particular
conditions, for example, for fully irrigated
conditions with adequate nutrients, or for a
particular type of drought or specific soil
condition such as low pH, examples of more
specific adaptations? For a well-defined target
with specific adaptation, the preferred cultivar
would have high and stable yields and low G X
E interaction within the target population of
environments, but may do very poorly
elsewhere.
My personal philosophy is that the scientific
breeding program should seek to lock in
adaptation to the dominant constraints of the
major target subecosystems. This involves
addressing difficult traits such as drought or
submergence tolerance, in collaboration with
physiologists, molecular biologists, and soil
scientists. Rainfed lowland rice may have
several dominant targets as indicated by Wade et
a1 ( 1997a) and discussed briefly above:
favorable, late drought, early drought,
submergence, fast-onset late drought, and
combinations of these. Each of these broad
targets represents substantial rainfed lowland
areas, with specific trait requirements. So the
core breeding program would seek to develop
populations adapted to the broad constraints of
these major target subecosystems. Within each
population, however, it is important to retain
variance for other nontarget traits, such as
phenology, grain quality, and others. These
materials may then be subjected to further
selection in more specific conditions, such as in
farmer participatory selection. The objective
then is to identify plants with specific
adaptations to local conditions (e.g., growing
season duration) and farmer preferences (plant
type, grain quality). For success, 1 believe that
the core program must address complex but
essential traits such as drought tolerance, using
all the tools now available. Farmer participation
and local phenotypic selection are most likely to
be successful with simply inherited traits of clear
expression, which confer local adaptation to
specific conditions, especially if repeatability is
high, such as low pH and flowering time. Such a
program should result in cultivars with broad
189
 adaptation to the principal constraints of target wide rows at low density to provide a store of
subecosystems and with specific adaptations to water between the rows as a buffer against dry
local variants. periods. Standard practice is a compromise
A similar argument may be provided for between these extremes. The yield probabilities
agronomic management. Broader strategies shown in Figure 2 quantify these concepts, so
should be developed initially in relation to the that the number of crop failures, likely yields,
same target subecosystems, ideally using the and economic returns can all be evaluated
adapted cultivars developed above. Such (Lansigan et al 1997).
strategies may then be locally modified
according to the specific characteristics of local
conditions and farmer preferences. This is an
important distinction. In practice, successful
cultivars are grown across several local
environmental variants, but with adjustment of
agronomic practices. The task of strategic
research is to understand the principles. There is
opportunity for research and extension, and for
farmers to participate together in adapting such
strategies to local conditions. It is important to
note that such tactics may be derived locally,
then applied more widely with extension or
NGO support. A common-sense evaluation of a
local problem may lead to a real solution. The
contribution of research may be in providing
further options to farmers, in checking and
ensuring sustainability of the resulting systems,
and in quantifying risk associated with
alternative strategies.

Quantifying risk associated with

alternative strategies

Risk can be quantified by analyzing data

collected over sites and years or through crop
simulation. Figure 2 shows an example of this,
in which cumulative distribution functions are
used to illustrate the response of sorghum to
plant density and row spacing at Katherine,
Emerald, and Dalby in Australia (Wade et al
1991, Wade 1995). Strategies are compared for
three possible farmer attitudes to risk. “Risk
takers” who own their property may be willing
to lose a crop in a poor season if yield and profit
can be maximized in a favorable season. High
density in narrow rows would be the strategy
employed in this instance. In contrast, “risk
avoiders” may wish to minimize the risk of crop
failure so they can always pay their debts, even
if it means sacrificing yield and profit in a good
season. These farmers would grow the crop in

190
Emerging technologies in rainfed
lowland
In crop improvement, the principal activities are
the national breeding programs, shuttle breeding
for exchange of knowledge and materials, G x E
interaction to understand patterns of response
and adaptation to target environments, and
participatory research with farmers for more
specific adaptations. In agronomy, research is
conducted in a cropping systems context, with
concerns for nutrient cycling and nutrient
requirement, weed ecology and management,
and the use of on-farm reservoirs, direct seeding,
and practices to alter patterns of water extraction
to buffer effects of drought. Some examples of
emerging technologies follow.
In northeast Thailand, crops are exposed to
severe drought on coarse-textured soils of low
fertility, where percolation loss of water is high,
and water and nutrient retention is low because
of low content of clay and organic matter and
low nutrient-buffering capacity. Three options
offer prospects to improve the situation by
increasing water- and nutrient-use efficiency:
leveling fields, compacting subsoil, and adding
recalcitrant organic matter (Sharma et a1 1995,
Trebuil et a1 1998).
In northwest Bangladesh, a change to earlier
maturing cultivars, especially if direct-seeded,
avoids late drought for rice and may permit a
short-duration crop of high value to be grown on
stored water, such as chickpea, linseed, or
mustard. Direct seeding may result in increased
weed problems, but pre-/postemergent
herbicides or the use of stale seedbeds should
reduce this threat (Mazid et al 1997, 1998).
The use of on-farm reservoirs and early
cultivars can reduce the impact of drought
(Saleh and Bhuiyan 1995). For submergence,
establishing vigorous seedlings with adequate
nutrient supply, especially with controlled-
release nutrients, improves crop survival and
recovery (Wade et a1 1998a,b). For rice blast,
supplying potassium and silicon by applying fly
ash has reduced infestation severity
(Pinnschmidt et a1 1996).
In crop improvement, adjustment of crop
phenology to match growing-season duration is
fundamental to improved adaptation. For
drought-prone areas, this may involve selection
for early maturity to escape drought or the use of
photoperiod sensitivity to ensure that anthesis
occurs during the most favorable part of the
growing season (Wade et a1 1997a). For rainfed
lowlands, where soil conditions fluctuate from
anaerobic to aerobic, a root system with a
capacity to extract water from deeper soil layers
should be advantageous for drought-prone
environments (Wade et a1 1997b). For short-term
submergence, seedling vigor for greater reserves
of assimilate; enzymatic machinery for
anaerobic respiration and protection from
aldehydes, active oxygen species, and other
harmful by-products; and a nonelongation
strategy should be effective (Setter et a1 1997). A
rapid increase in plant height and a rapid
expansion of leaf area are considered
advantageous for weed suppression (Bastiaans et
al 1997).
Issues in the adoption of promising
technologies
On-farm development of promising technologies
is conducted to link research at key sites of the
Rainfed Lowland Rice Research Consortium
(RLRRC) with the activities of applied research
and extension staff of the national systems and,
more recently, with staff of nongovernment
organizations that work closely within their
villages.
In Bangladesh, research has demonstrated
benefits of a transition from a long-duration, T.
aman sole rice crop to a short-duration rice/
chickpea rotation. At Rajshahi, researchers from
the Bangladesh Rice Research Institute have
active collaboration with extension block
supervisors of Bangladesh Agricultural
Extension Service, technicians from the
Bangladesh Rural Advancement Committee
(BRAC), and local farmers from Nachole,
Thanore, and Ghadagari. The on-farm
demonstrations provide an opportunity for
research and extension, and for farmers to
discuss and evaluate alternative agronomic
approaches to implementing the new rotation in
local conditions. BRAC provided staff to
191
 support the local demonstrations, brochures in
local languages, and venues for regular farmer
meetings and discussions.
In Thailand, researchers from Rice research
Institute of Thailand (RRIT) collaborate with
technicians from the Population and Community
Development Association and farmers from
Nang Rong and Lamplaimat in defining
production constraints and setting up appropriate
demonstrations. These include attention to field
leveling for improved rainfall management,
nutrient management, weed management, and
their combination.
The approach is now being considered for
all RLRRC key sites, as an additional activity to
supplement the research activities. This involves
analysis of problems with farmers, identifying
likely technologies from anywhere (RLRRC,
NARES, farmers, literature), and demonstrating
and evaluating the technology on-farm. It should
be emphasized that this is a two-way learning
process. Farmers, extension agents, and NGO
staff gain from the technical knowledge of the
researchers, while the researchers learn from
problem identification and feedback from their
clients.
Conclusions
Dr. R.B. Singh stated, “Our technology has to be
location-specific, with systems devised at the
local level. The technology must be considered
in its ecosystem context. This is the crux of the
problem.” In the end, I agree completely with
Dr. Singh. We should identify our technology
interventions for on-farm development with the
farmers, drawing from our research and
experience, and from theirs. We should modify,
evaluate, and adapt the technology according to
local needs.
But I do not believe this job is impossible.
We do not need a new technology for every
field. There are repeatable patterns over sites
and years. Our technology should be systems-
based and suitable for local adaptation. I believe
that the farmer is an innovator who can devise
novel solutions for a particular situation, given
the vision (from wherever) of how a new
technology can help. We as scientists should be
involved in the modification-adoption-feedback
192
process so we can learn and better target the next
generation of research and adoption.
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A, Migo TR. 1997. Can simulation models
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Bhuiyan SI, Tuong TP, Wade LJ. 1998.
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Douthwaite B, Tado CJM, Calendacion AN,
Wade LJ, Cassman KG, Quick GR. 1995.
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of ratoon rice. In: Fragile lives in fragile
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Lansigan FP, Pandey S, Bouman BAM. 1997.
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management strategies. Field Crop Res. 51:
133-145.
Mazid MA, Mollah MIU, Mannan MA, Elahi
NE, Ali A, Ahmed HU, Hasan M, Rashid
MA, Siddique SB, Kumar J, Wade LJ. 1997.
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increase productivity for high Barind tract of
Bangladesh. International Food Legume
Research Conference, Adelaide, Australia.
Mazid MA, Wade LJ, Saleque MA, Sarkar ABS,
Mollah MIU, Olea AB, Amarante ST,
McLaren CG. 1998. Nutrient management
in rainfed lowland rice for the high Barind
tract of Bangladesh. In: Ladha JK et al,
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nutrient management research. Manila
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Pinnschmidt HO, de la Pena F, Suriya-Arunroj
D, Don LD, Teng PS. 1996. Approaches for
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agroecosystems of some Southeast Asian
countries and consequences for crop
protection. J. Plant Dis. Prot. 103:620-643.
Saleh AFM, Bhuiyan SI. 1995. Crop and
rainwater management strategies for
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rice systems. Agric. Syst. 49:259-276.
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Amin R, Hampichitvitaya D, Pantuwan G,
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Datta S. 1997. Physiology and genetics of
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193
Discussion
Question: You have mentioned the need for
participatory research and
involvement of NGOs in technology
transfer. Could you please tell us
about the experience of IRRI in this
regard.
Answer: IRRI has just started work on
rainfed lowland rice in Thailand and
Bangladesh, where NARS
collaborators, including NGOs, are
involved. Participation of NGOs is
important as they work very closely
with farmers and understand farm
situations and problems. Breeding
materials developed on research
stations may not satisfy all
requirements of farmers. Their
involvement through on-farm
research even in segregation stage
enables realistic evaluation of
breeding material.
Question: There may be several problems
relating to farmers’ participation in
on-farm research. For example,
costs involved in terms of low
returns from experiments may not
attract farmers, particularly small
and marginal farmers, and
eventually, there would be some
kind of contractual participation by
farmers, i.e. giving some land for
experiments. How are these
problems taken care of in the IRRI’s
programmes.
Answer: On-farm research involves a range
of arrangements including putting
few lines on farmers’ fields to
having breeding nurseries right
there. One can minimise the cost to
farmers by bringing farmers to the
nursery and obtain their feedback.
Social scientists may further
supplement on the issue of poor
farmers’ participation, but breeders
may be interested more in soil types
194
and environment that are
represented in farmers’ fields rather
than the issue of small versus large
farmers.
Comment: In India, we have selected farmers
based on several criteria like farm
size, ethnicity, access to markets,
etc. to assess impact of these factors
on breeding criteria. The selection
of farmers by farm size was done
randomly, and selected farmers
volunteered for participation.
Farmers are brought to research
stations to select lines which are
subsequently put on farmers’ fields.
Comment: By and large, participation of
farmers and NGOs in research is
good, and there are some very big
NGOs like those in Brazil, which
are participating effectively. To
address some of these participatory
issues, the CGIAR has constituted
the CG-NGO Committee.
Notes
Author’s address: International Rice Research
Institute, MCPO Box 3127, Makati City
1271, Philippines.
Citation: Pandey S, Barah BC, Villano RA, Pal
S. 2000. Risk analysis and management in
rainfed rice systems. Limited Proceedings of
the NCAP/IRRI Workshop on Risk Analysis
and Management in Rainfed Rice Systems,
21-23 September 1998, National Centre for
Agricultural Economics and Policy
Research, New Delhi, India. Los Baños
(Philippines): International Rice Research
Institute.
Participants

Adlakha, A Indian Rice Exporters Association

Ballabh, Vishwa Dr. Indian Institute of Rural Management
Barah, BC Dr. National Centre for Agricultural Economics and Policy Research
Bardhan Roy, SK Dr. Directorate of Agriculture, West Bengal
Behura, DD Mr. Orissa University of Agriculture and Technology
Bhowmick, BC Dr. Assam Agricultural University
Chadha, GK Dr. Jawaharlal Nehru University
Chandra, R Dr. National Centre for Agricultural Economics and Policy Research
Gogoi, J Dr. Assam Agricultural University
Guru, A Dr. National Centre for Agricultural Economics and Policy Research
Haque, T Dr National Centre for Agricultural Economics and Policy Research
Hossain, Mahabub Dr. International Rice Research Institute
Jain, R Dr. National Centre for Agricultural Economics and Policy Research
Janaiah, Aldas Dr. Directorate of Rice Research
Jha, D. Dr. National Centre for Agricultural Economics and Policy Research
Joshi, PK Dr. National Centre for Agricultural Economics and Policy Research
Kaul, GL Dr. Indian Council for Agricultural Research
Krishnaiah, J Dr. Andhra Pradesh Agricultural University
Kumar, Anjani Dr. National Centre for Agricultural Economics and Policy Research
Kumar, P Dr. Indian Agricultural Research Institute
Madan, ML Dr. Indian Council for Agricultural Research
Marothia, D Dr. Commission on Agricultural Costs and Prices
Mishra, PK Dr. Government of Gujarat
Morin, Steve Dr. International Rice Research Institute
Mruthyunjaya, Dr. Indian Council for Agricultural Research
Naik, D Dr. Orissa University of Agriculture and Technology
O’Toole, J Dr. Rockefeller Foundation
Pal, Suresh Dr. National Centre for Agricultural Economics and Policy Research
Palanisami, K Dr. Tamil Nadu Agricultural University
Pandey, RK Dr Indian Agricultural Statistics and Research Institute
Pandey, Sushil Dr. International Rice Research Institute
Prasana, L Dr National Centre for Agricultural Economics and Policy Research
Ram, Salik Dr. Central Rice Research Institute
Ramasamy, C Dr. Tamil Nadu Agricultural University

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Rana, Subrata Mr. International Institute for Rural Reconstruction
Roy, BC Dr. National Centre for Agricultural Economics and Policy Research
Saha, NK Dr. Directorate of Agriculture, West Bengal
Samal, P Dr. Central Rice Research Institute
Sehara, DBS Dr. Indian Council for Agricultural Research
Selvarajan, S Dr. National Centre for Agricultural Economics and Policy Research
Sen, A Dr. Commission on Agricultural Costs and Prices
Sharma, SD Dr. Indian Agricultural Statistics and Research Institute
Sharma, SK Dr. Indira Ghandi Agricultural University
Singh, G Dr. National Centre for Agricultural Economics and Policy Research
Singh, HN Dr. Narendra Deva University of Agriculture and Technology
Singh, Parmanta Dr. Indian Agricultural Research Institute
Singh, Pratap Dr. National Centre for Agricultural Economics and Policy Research
Singh, RB Dr. Indian Agricultural Research Institute
Singh, RP Dr Indian Agricultural Research institute
Thakur, Jawahar Dr. Rajendra Agricultural University
Villano, Renato Mr. International Rice Research Institute
Wade, Len Dr. International Rice Research Institute

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