Dairy Development in India:
A strategy for pro-poor growth?
Mara Squicciarini
Anneleen Vandeplas
Johan Swinnen
LICOS, KU Leuven
Introduction
• India is home to 1/3 of the world’s poor
• Poverty headcount around 400 million
• Growth in agriculture is considered far more effective
for poverty reduction and ensuring food security than
in manufacturing or services (Ravallion, 2009)
Introduction
• Dairy is considered a sector with great potential for
pro-poor development and increasing food security
• With poor access to land, activities which require less land
offer more potential for poverty reduction than e.g. crop
farming
• Dairy is said to have potential for “huge employment
generation”
• Important nutritional benefits
Research Question
• Does dairy production contribute to rural livelihoods?
• Does dairy production offer potential for pro-poor
growth?
• Micro-econometric analysis of a unique primary
dataset on 1000 rural households in Andhra Pradesh
(India)
Relevance
•
•
•
•
Agricultural policies in India
International trade negotiations
Poverty reduction strategies by NGOs
Wider bio-economy: importance of preconditions for
successful pro-poor innovation
Dairy in India
• India is largest milk producing country in the world
• India’s milk market is the 2nd most important food
market in the world
• after China’s pork market
• 40 billion $/year
• 120 million MT/year
• Dairy is a very traditional rural activity:
• Animals for draught power
• Fresh milk for home consumption
Dataset: Andhra Pradesh
Region under study
Sample districts
• 4 districts
• 50 villages
• 20 hh/village
Descriptive statistics
Sample
Population
AVG
SD
AVG
SD
Age HH head
Years
47.0
11.1
46.3
11.3
Education level hh head
Years
3.4
5.0
3.3
4.8
HH with dairy animals
%
80
51
HH producing milk
%
79
50
Nr of DA 2005
Nr
2.5
3.2
2.2
2.5
Nr of DA 2010
Nr
3.1
2.6
2.5
2.0
Productivity DA
L/day/DA
3.4
3.2
3.3
2.7
Descriptive statistics
No DA
1-2 DA
3-5 DA
>5 DA
AVG
Land owned
(acres)
1.6
3.1
4.4
5.9
2.6
Total income
(Rs/year)
91,047
112,600
242,280
276,667
125,615
Income from dairy
(Rs/year)
n.a.
12,810
29,471
65,670
10,482
Income from crops
(Rs/year)
39,194
64,053
173,664
146,825
70,114
Income per capita
(Rs/year)
29,462
30,061
55,111
53,450
34,066
-0.26
-0.13
0.26
0.79
-0.2
31.5
27.9
17.4
12.4
27.7
Asset index 2010
Low caste (SC/ST)
(%)
Income effects of participation
𝑦 = 𝛼 + 𝛽𝑋 + 𝛾𝑍 + 𝛿𝑉 + 𝜀
• 𝑦: income per capita, asset index, land ownership
• 𝑋𝑖 : household characteristics: age & education of hh
head and spouse, caste, religion, family engaged in
dairy, elderly hh members, lagged land and asset
ownership
• Land is included in 2 different specifications
• 𝑉𝑖 : village fixed effects (+clustered SE)
Household characteristics
Milk producer
Age HH head
Age2 HH head
Education level HH head
Age HH head's spouse
Unit
1 if milk producer
years
1
Income per cap.
Coeff.
SE
0.228*** 0.086
0.014
0.032
2
Income per cap.
Coeff.
SE
0.274*** 0.088
0.016
0.033
3
Asset index
Coeff. SE
-0.080 0.061
0.020
0.020
4
Land in 2010
Coeff. SE
0.109** 0.048
0.007
0.016
years
years
-0.000
0.002
0.013
-0.000
0.002
0.014
-0.000
0.015*
-0.011
-0.000
0.002
-0.000
0.000
0.005
0.032
0.000
0.005
0.033
0.000
0.008
0.012
Age2 HH head's spouse
-0.000
0.000
-0.000
0.000
0.000
0.000
0.000
Education level HH head's spouse years
0.001
0.011
0.005
0.011
0.004
0.008
-0.002
SC/ST
1 if SC/ST
-0.009
0.096
-0.038
0.091
-0.132** 0.060
-0.097**
HH members over 55
number
0.005
0.055
0.020
0.054
-0.027 0.043
-0.058**
Nr of HH members in ad. eq.
number
-0.135*** 0.026
-0.137*** 0.025
0.072*** 0.022
0.027**
Owned land 2005
log (acres)
0.245*** 0.051
0.117*** 0.043
0.717***
Asset index 2005
0.159*** 0.033
0.148*** 0.033
0.726*** 0.059
0.029
Marginal farmer
1 if marginal farmer
-0.106
0.090
Small farmer
1 if small farmer
0.333*** 0.071
Medium farmer
1 if medium farmer
0.197
0.127
Large farmer
1 if large farmer
0.441*** 0.169
Intercept
9.596*** 0.509
9.617*** 0.509
-0.182 0.367
-0.038
Village FE
Yes
Yes
Yes
Yes
Number of observations
863
863
863
863
Adjusted R-sq
0.135
0.147
0.628
0.664
Notes: The four specifications have been estimated through an OLS regression with village FE and clustered SE at the village level.
Key: * significant at 10%, ** 5%, *** 1%
0.000
0.004
0.011
0.000
0.006
0.048
0.025
0.012
0.060
0.033
0.276
Findings
• Income per capita
• Positive impact of dairy
• Positive impact of land and other asset ownership
• Asset index
• No impact of dairy
• Positive impact of land and other asset ownership
• Land accumulation
• Positive impact of dairy
• Positive impact of land and other asset ownership
Who is producing milk?
𝑦𝑖∗ = 𝛼 + 𝛽𝑋𝑖 + 𝛾𝑉𝑖 + 𝜀,
with
𝑦𝑖 = 1
𝑦𝑖 = 0
𝑖𝑓 𝑦𝑖∗ ≥ 𝑌
𝑖𝑓 𝑦𝑖∗ < 𝑌
• 𝑋𝑖 : household characteristics: age & education of hh
head and spouse, caste, religion, family engaged in
dairy, elderly hh members, land and asset ownership
• Land is included in 3 different specifications
• 𝑉𝑖 : village fixed effects (+clustered SE)
Household characteristics
Age HH head
Age2 HH head
Education level HH head
Age HH head's spouse
Unit
years
1
Milk producer
Coeff. SE
0.061
0.067
2
Milk producer
Marg.Eff SE
0.008
0.009
3
Milk producer
Coeff. SE
0.064
0.069
4
Milk producer
Coeff. SE
0.061
0.068
years
years
-0.000
-0.005
-0.037
-0.000
-0.001
-0.005
-0.000
-0.005
-0.045
-0.000
-0.006
-0.047
0.001
0.017
0.051
0.000
0.002
0.007
0.001
0.018
0.054
0.001
0.018
0.054
Age2 HH head's spouse
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Education level HH head's spouse years
-0.032 0.026
-0.004
0.003
-0.040 0.027
-0.041 0.027
SC/ST
1 if SC/ST
-0.004 0.209
-0.001
0.027
0.055
0.223
0.078
0.216
Muslim
1 if Muslim
0.105
0.320
0.013
0.037
0.166
0.325
0.117
0.339
Christian
1 if Christian
0.540* 0.306
0.051*** 0.019
0.550* 0.314
0.550* 0.306
Parents with DA
1 if parents had DA
1.849*** 0.210
0.347*** 0.036
1.927*** 0.207
1.951*** 0.203
Related HHs with DA
number
0.122*** 0.038
0.016*** 0.004
0.119*** 0.037
0.117*** 0.037
HH members over 55
number
0.018
0.146
0.002
0.019
0.016
0.147
-0.005 0.146
Nr of HH members in ad. eq.
number
0.087
0.069
0.011
0.009
0.089
0.069
0.092
0.071
Owned land 2005
log (acres)
0.433*** 0.122
0.057*** 0.016
0.022
0.144
Asset index 2005
0.227** 0.102
0.030** 0.014
0.248** 0.107
0.274** 0.110
Land ownership
1 if owning land
0.865*** 0.265
Marginal farmer
1 if marginal farmer
0.980*** 0.206
Small farmer
1 if small farmer
-0.305 0.218
Medium farmer
1 if medium farmer
0.305
0.361
Large farmer
1 if large farmer
0.474
0.585
Intercept
-1.211 1.258
-1.268 1.228
-1.102 1.209
Village FE
Yes
Yes
Yes
Yes
Number of observations
863
863
863
863
Pseudo R-sq
0.399
0.399
0.412
0.416
Notes: The three specifications have been estimated through probit regression including a full set of village dummies and clustered SE at the village level.
Column 2 represents the marginal effects of the regression in Column 1. Key: * significant at 10%, ** 5%, *** 1%
Findings
• Participation in dairy is mainly determined by
• Family tradition
• Cultural factors
• Asset ownership
• wealthier hh more likely to participate in dairy
• Land ownership
• hh with land (even if small) more likely to engage in dairy
Discussion of results
• Dairy contributes positively to livelihoods
• Both in terms of income per capita and in terms of land
accumulation
• No significant impact on other assets
• Maybe because for hh with a positive attitude towards
agriculture, investing in land has higher returns
• However, when looking at who is involved in dairy
production, we seem to find a pro-rich rather than a
pro-poor bias
• Land seems an important complementary asset
• We do not (yet?) find much employment in dairy sector
for external laborers
• Maybe elsewhere?
Implications
• Unless factor market imperfections are solved, dairy
development may not offer as much potential for propoor growth as is often hypothesized
• Mainly as a result of constrained access to land
• If self-sufficiency in milk is their objective,
policymakers need to address these constraints
• Already milk has been found to contribute importantly to
food inflation (Mishra & Roy 2011)
• Milk price inflation increases incentives for adulteration of
milk, as in China (Gale and Hu 2009)
Thank you!