To assess the effect of agricultural growth, within overall economic growth, on reducing poverty, one needs to look at the elasticity of growth on poverty reduction: that is, how much the poverty rate falls if average national income rises by one percent. One study shows that in developing countries this coefficient is generally around minus 2 on average, meaning a 10 percent rise in average real per capita income cuts the poverty rate by 20 percent. Readers can judge from this why, and how much, economic growth matters in reducing poverty.

To put it another way: whatever anyone says, I want growth, especially in a developing country like Bangladesh. But in Bangladesh the growth elasticity of moderate poverty is very low, and has been falling since 2005. Calculations show the coefficient was only 0.80 in 2016-2022, meaning a 10 percent rise in real per capita income reduces moderate poverty by only 8 percent (against a developing-country average of 20 percent). By contrast, it was 0.84 in 2010-2016 and 0.96 in 2005-2010. In short, the responsiveness of moderate poverty to growth in Bangladesh is quite low and has been declining steadily for the past 17 years.

Using BBS data, it can be shown that the elasticity of poverty reduction to agricultural growth is 2.26: in 2016-2022, a 10 percent rise in real per capita agricultural GDP reduced poverty by about 23 percent. The non-farm growth elasticity, by contrast, is 0.72, meaning 10 percent growth in non-farm activity reduces poverty by only around 7 percent. Such statistics seem to show that, at least in reducing poverty, agricultural growth is more than three times as powerful as non-farm growth: the same rate of growth is more effective in agriculture than outside it.

The million-dollar question now is what role agriculture plays in reducing poverty. Historically, agriculture has played a significant role in cutting poverty in developing countries. The share of GDP coming from agriculture generates meaningful income among the poorest groups in society. Beyond directly reducing poverty, agriculture has strong linkage effects across the whole economy. Its indirect contribution comes through off-farm activity: backward linkages, including demand for fertiliser, irrigation equipment, pesticides and other inputs, and forward linkages, including packaging, transport, industrial processing, storage and markets for farm products. These activities drive broad growth in the off-farm sector, bringing more jobs and income. However, it is thought that the richer a country becomes, the more the edge of agricultural growth over the off-farm sector in reducing poverty will shrink.

Social scientists broadly consider the achievements of Bangladesh's agriculture over time to be satisfactory, as recent research by the noted agricultural economist M A Sattar Mandal also shows. Although agriculture's share of total GDP has fallen from about 35 percent in the 1980s to 12 percent today, farm output has grown at an average of 3 percent a year for nearly a decade. There has been a notable shift in the shares of subsectors: the crop subsector's contribution to agricultural GDP has fallen from 65 percent in 1990 to 48 percent today, while livestock has risen from 12 to 15 percent and fisheries from 15 to 22 percent. The significance of this structural change is easy to see: output of protein-rich farm products is rising.

The surprising thing is rising output in the face of shrinking farmland. Per capita arable land was 28 decimals in 1972-73; 50 years later it has fallen to 10 decimals. Yet per capita food grain output, including rice and wheat, was then 140 kg and has recently more than doubled to 285 kg. Maize production is rising alongside rice and wheat. In short, though arable land shrinks by about half a percent a year, per capita food grain production has risen by around 145 kg; per capita meat production is now 55 kg against just 4 kg; eggs have risen from 15 to 138; milk from 6 kg to 77 kg; and fish from 11 kg to 28 kg. As a result, we are now nearly self-sufficient in food, with vegetables, fish, meat, eggs and milk supplied from domestic sources; rural incomes have risen, hunger and malnutrition have fallen, and Bangladesh is out of the shadow of famine.

Who are the pioneers of this change? There are nearly two crore farming households. Small farms are 24 percent more numerous than before, while medium and large farms are 29 and 41 percent fewer respectively. The average farm is 0.8 acres. Small and marginal farmers, whose own and sharecropped land together comes to less than two and a half acres, make up 92 percent of farmers and control 60 percent of cultivated land. The rest of the land is farmed by medium and large farmers, who make up 10 percent of farmers. In short, small and marginal farmers are now the heart of Bangladesh's agriculture, and their dominance is growing.

Sattar Mandal also explained why medium and large farmers are disappearing and small farmers gaining influence: large and medium farming households lack family members to work the land, so farming with hired labour is very expensive. They are therefore sharecropping, mortgaging or leasing their land to those who once farmed it for them. Small farmers, by contrast, have relatively more family labour. But reluctance among the young members of all farming families, small or large, to do physically demanding farm work is no secret.

Agriculture is becoming increasingly commercial, with market-bought inputs replacing household ones. As a result, new players offering farm services are entering the market. According to researcher M A Sattar Mandal, they include new farmers, wage labourers, transport services, producers and sellers of animal feed and vaccines, and mechanics and operators of harvesting, threshing and winnowing machines, along with thousands of farm machinery importers, dealers and repair workshops.

How small and marginal farmers will survive in such an environment, especially in corporate agriculture, has also been researched by M A Sattar Mandal, but that can be discussed another time.

The writer is an economist, columnist and former vice-chancellor of Jahangirnagar University.

Source: Jagonews24. First published in Bengali on The Agro News.