ECONOMICS EXTENDED ESSAY
Session - May 2024
Title: Government Intervention & Economic Well-Being of Farmers
1
Research Question: To what extent has the implementation
of the Agriculture Infrastructure Fund (AIF) in 2020 impacted
the economic upliftment of farmers in, Dharwad Karnataka?
1
Laxmi. “Farming in India: Story of the Indian Farmer, Types of Farming, Examples.” Learn Cram, 23 July 2021,
www.learncram.com/notes/farming-in-india/. Accessed 6 Mar. 2024.
Word Count: 3,989
Table of Contents
INTRODUCTION ................................................................................................................ 2
HYPOTHESIS............................................................................................................................. 5
METHODOLOGY ....................................................................................................................... 5
THEORTICAL ANALYSIS...................................................................................................... 7
SUBSIDY THEORY AND VALUE CHAIN THEORY........................................................................... 7
ECONOMIC DEVELOPMENT & DIVERSIFICATION THEORY ........................................................ 15
NEOCLASSICAL GROWTH THEORY & SOLOW – SWAN MODEL ................................................. 20
CONCLUSION .................................................................................................................. 23
LIMITATIONS OF THE STUDY ........................................................................................... 24
SCOPE FOR FUTURE RESEARCH ....................................................................................... 25
BIBLIOGRAPHY ............................................................................................................... 26
APPENDIX....................................................................................................................... 34
APPENDIX A: QUESTIONNAIRE ............................................................................................... 34
APPENDIX B – SURVEY RESPONSES ......................................................................................... 39
APPENDIX C – DATA TABLES FOR CALCULATIONS .................................................................... 39
2
INTRODUCTION
The agricultural sector highly contributes to the Indian economy. By employing a significant
amount of workforce to produce food it is reducing unemployment levels and highly
contributing to the country’s rural development2. According to the reports published by the
Food and Agriculture Organization of the United Nations (FAO)3 agriculture accounts for 59%
of the country’s total workforce4 and 23% of India’s GDP. The agricultural sector is still very
crucial for the Indian economy. The contributions made by this sector to the Indian economy
are increasing significantly over the years. Based on the economic survey5 conducted by the
Ministry of Finance, Government of India, the agriculture industry’ share in the GDP of India
in the year 2019 reached up to a 20% for the first time in 17 years. The performance put forth
by this industry in the year 2020-2021 shows the pivotal role played by this industry in helping
the country grow. The agricultural sector in India is made up of small and marginal farmers
who are posed with many difficulties which include limited access to financial resources,
market inefficiencies and inadequate infrastructure6.
2
Rathore, Manya. “India: employment in agriculture sector 2023.” Statista, 15 September 2023,
https://www.statista.com/statistics/1284035/india-employment-in-agriculture-sector/. Accessed 21 January 2024.
3
Food and Agriculture Organization of the United Nations: Home, https://www.fao.org/home/en. Accessed 21
January 2024.
4
India: GDP from Agriculture 2022 | Statista.” Statista, Statista, 2022, www.statista.com/statistics/1233800/indiagdp-contribution-from-agriculture/. Accessed 6 Dec. 2023
5
Economic Survey 2022-23. "Ministry of Finance, Government of India." finmin.nic.in, 2023. Web. 5 Dec. 2023.
6
A Study on Small and Marginal Farmers problem faced at farm level: Assessing the PACS member's Satisfaction
Level.”
International
Journal
of
Innovative
Research
in
Technology,
https://ijirt.org/master/publishedpaper/IJIRT153118_PAPER.pdf. Accessed 21 January 2024.
3
Dharwad, Karnataka is a state located in the south of India. Its diverse agro climatic conditions
make it suitable for increased agricultural productivity7. This state is the second largest
producer of sugar, cotton, rice, sugarcane, wheat, fruit, vegetables, tea and farmed fish in
India8. Karnataka has a diversified agricultural industry, where different crops are grown
throughout the year along with horticulture crops like mango, pomegranate, and grapes9.
Agriculture forms the backbone of Dharwad’s economy. This district is known for its high
agricultural productivity and a significant portion of the population is engaged in farming and
related activities. However, despite the high productivity levels, the farmers in Dharwad are
facing several challenges such as low market prices for their products, inadequate
infrastructure, and lack of access to credit. Moreover, this is a topic that has not been studied
in detail previously, making this study worthy of investigation
For further economic upliftment of the farmers in India, the government of India launched the
Agricultural Infrastructure Fund (AIF) in 2019 10. This fund aimed to address the challenges
faced by the famers by providing financial support in the agricultural sector and by improving
the infrastructure11. The fund aimed at facilitating the construction of warehouses, storage
facilities, transportation facilities and processing units12. The construction of these post-harvest
7
Rotti, Jolad. “Climate in Karnataka | Karnataka Weather.” Karnataka.com, 26 March 2016,
https://www.karnataka.com/profile/karnataka-climate/. Accessed 21 January 2024.
8
Agriculture Farming In Karnataka, Cultivation Of Crops.” Agri Farming, 25 August 2020,
https://www.agrifarming.in/agriculture-farming-in-karnataka-cultivation-of-crops. Accessed 21 January 2024.
9
Department of Agriculture and Farmer Welfare, Government of India. "Karnataka Agriculture."
agricultura.kar.nic.in, 2023. Web. 5 Dec. 2023.
10
Agriculture Infrastructure Fund.” myScheme, https://www.myscheme.gov.in/schemes/aif. Accessed 21
January 2024.
11
Final Estimates of 2020-21 and First Advance Estimates of 2021-22 of Area and Production of Horticultural
Crops.” PIB, 28 March 2022, https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1810624. Accessed
21 January 2024.
12
Reserve Bank of India, https://rbi.org.in/. Accessed 21 January 2024.
4
facilities was done to increase the income levels of the farmers. They also aimed at making
sure that farmers could sell their produce at higher prices, improving value chains to strengthen
market linkages, and promote agricultural entrepreneurship13.
The key objective of this research paper is to assess the extent to which the implementation of
the Agriculture Infrastructure Fund has impacted the economic upliftment of farmers in
Dharwad, Karnataka. In this research paper there will be a detailed exploration of different
factors which include : change in income levels, improved market access, new agricultural
practices and expansion into new businesses of the farmers after the introduction of the AIF,
thereby bringing us to the research question of the essay, “To what extent has the
implementation of the Agriculture Infrastructure Fund (AIF) in 2019 impacted the
economic upliftment of farmers in, Dharwad Karnataka?”. The scope of this study is to be
able to provide valuable insights the impact of AIF on the economic upliftment of farmers in
the region and to evaluate the extent to which the AIF has achieved its objectives in Dharwad.
13
National Bank for Agriculture and Rural Development (NABARD). "Agriculture Infrastructure Fund (AIF)."
nabard.org, 2023. Web. 5 Dec. 2023.
5
HYPOTHESIS
This research paper aims to approve the following hypotheses:
1.
The farmers of Dharwad will experience increased income levels because of the
allocations in 2020 - 2021 by the Agriculture Infrastructure Fund.
2.
The AIF will be able to help develop agri-businesses, creating other options for income
raising and diversification among Dharwad farmers.
3.
The AIF will enhance agricultural productivity due to the adoption of modern
technologies and practices, resulting in improved crop yields per hectare of land.
METHODOLOGY
Secondary data was collected from organisations such as Reserve Bank of India14, NABARD15,
Ministry of Finance16, Dharwad District Farmers' Association17 and many more, which
provided information on the Agriculture Infrastructure Fund (AIF) and its long-term financial
assistance for building infrastructure for the post-harvest stage. Due to its association with the
government, Portal of India18 is recognised as a trustworthy source for information on
governmental issues. Additionally, Newspaper articles and official reports
14
“Reserve
Bank
of
India
Reports.”
Rbi.org.in,
www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=942. Accessed 6 Mar. 2024.
2019,
15
National Bank For Agriculture And Rural Development.” NABARD - National Bank For Agriculture And
Rural Development, https://www.nabard.org/PressReleases-article.aspx?id=25&cid=554&EID=68. Accessed 21
January 2024.
16
Ministry of Finance, Government of India. "Agriculture Infrastructure Fund." finmin.nic.in, 2023. Web. 5 Dec.
2023.
17
Dharwad District Farmers' Association. "Challenges Faced by Farmers in Dharwad." dharwadfarmers.org,
2023. Web. 5 Dec. 2023.
18
National Portal of India, https://www.india.gov.in/. Accessed 21 January 2024.
6
such as Indian Express19 and The Annual Report 2020-2120 provided information on the launch
of the AIF and its benefits, including the building of post-harvest storage and processing
facilities and data from them undergoes objective reporting and respect to editorial standards.
The Lok Sabha Secretariat Intranet11 also were used that provided information on contribution
to mitigating post-harvest losses and wastage by promoting scientific storage facilities. This
source is credible as it is the official intranet of the Lok Sabha Secretariat. The Lok Sabha
Secretariat Intranet is a credible source because it offers internal and official information of the
lower house of the Indian Parliament.
Primary data to investigate the impact of the Agriculture Infrastructure Fund (AIF) in Dharwad,
was collected through questionnaires and interviews, enabling an in-depth exploration of key
research areas. A sample size of 30 farmers were selected using a stratified random sampling
technique that categorizes participants based on farm size and geographic zones. Through these
questionnaires and interviews, data regarding frequency of AIF technologies, satisfaction,
accessibility, crop yields, income levels, etc was collected from farmers. These measures were
further analysed under the lens of economic theories of subsidy, value chain theory, neo
classical growth model and Solow Swan Theory. The theories were further supported with the
use of statistical tools such as Regression, T-Test and Pearson’s Correlation.
19
https://indianexpress.com/article/explained/what-ails-with-the-agriculture-infrastructure-fund-aif-pmmodi-6557894/ accessed
20
https://msme.gov.in/sites/default/files/MSME-ANNUAL-REPORT-ENGLISH%202020-21.pdf
7
THEORTICAL ANALYSIS
SUBSIDY THEORY AND VALUE CHAIN THEORY
The Value Chain Theory provides a framework for understanding how the various stages of
production of goods can be enhanced to improve overall efficiency and profitability21. In the
context of agriculture, facilities play a crucial role in several stages of the value chain, from
pre-harvest activities like seed treatment and storage to post-harvest processes like processing
and packaging22. Subsidy Theory suggests that government interventions, such as subsidies,
can influence market outcomes by altering production costs or consumer prices23. In the context
of agriculture, subsidies provided for the establishment of modern storage and processing
facilities through programs like the Agriculture Infrastructure Fund (AIF) can significantly
impact farmers' access to these facilities.
21
R. Kaplinsky, and M Morris. A Handbook for Value Chain
www.semanticscholar.org/paper/A-handbook-for-value-chain-research-KaplinskyMorris/a87e730e3ddceef8dd18bdb20fb03d2b24268f21. Accessed 6 Mar. 2024.
Research.
,
2017,
22
Research.
,
2017,
R. Kaplinsky, and M Morris. A Handbook for Value Chain
www.semanticscholar.org/paper/A-handbook-for-value-chain-research-KaplinskyMorris/a87e730e3ddceef8dd18bdb20fb03d2b24268f21. Accessed 6 Mar. 2024.
23
Musgrave, R. A. (1959). The Theory of Public Finance: A Study in Public Economy. McGraw-Hill.
8
Figure 1 – Subsidy diagram for the goods in Dharwad24
By subsidizing the establishment of these facilities, governments aim to lower the financial
barriers for farmers, facilitating their access to modern technologies25 and improving their
efficiency26 along the value chain, leading to rightward shift in supply curve from S to
S+subsidy in Figure 1. This integration emphasizes that subsidies for facilities, such as those
provided through initiatives like the Agriculture Infrastructure Fund (AIF), play a crucial role
in enhancing farmers' productivity, increasing quantity from Q1 to Q2, reducing post-harvest
losses, and ultimately improving their overall wellbeing by enabling them to adopt modern and
24
Tragakes, Ellie. IB Economics: Study Guide. 2nd ed., Oxford University Press, 2017
25
Otsuka, Keijiro, and Takashi Yamano. "The Role of Agricultural Mechanization in Africa’s Structural
Transformation." Journal of African Economies, vol. 29, no. 5, 2020, pp. 545–559.
26
Schmitz, H, and J Humphrey. Governance and Upgrading: Linking Industrial Cluster and Global Value Chain
Research. , 2020, www.semanticscholar.org/paper/Governance-and-Upgrading%3A-Linking-Industrial-andSchmitz-Humphrey/b293a0897c52f02bd6efc2aeadbaea67d071f7b3. Accessed 6 Mar. 2024.
9
well-equipped facilities27. This theory focuses on the relationship between the changes in
facilities used and the changes in income28 and suggests that, ceteris paribus, farmers would
experience an improvement in their overall well-being when they have increased access to
modern and well-equipped facilities.
Figure 2 - Income Distribution of farmers before and after implementation of AIF29
Figure 2 indicated that farmers within the income bracket of Rs. 50,000 to Rs. 1,00,000
experienced the highest increase in income levels after the implementation of AIF.
𝛴 𝐼𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑚𝑝𝑙𝑒𝑚𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛
𝑁𝑜. 𝑜𝑓 𝐹𝑎𝑟𝑚𝑒𝑟𝑠
3,75,000
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 =
30
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 = ₹12500
𝛴 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑖𝑚𝑝𝑙𝑒𝑚𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 =
𝑁𝑜. 𝑜𝑓 𝐹𝑎𝑟𝑚𝑒𝑟𝑠
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 =
27
Gereffi, Gary. "International Trade and Industrial Upgrading in the Apparel Commodity Chain." Journal of
International Economics, vol. 48, no. 1, 1999, pp. 37–70.
28
Ponte, S. (2000). Greening the chain: Regulation and the politics of sustainability standards in the food sector.
Environment and Planning A, 32(9), 1567-1582.
29
Appendix B
10
6,00,000
30
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 = ₹20000
𝑁𝑒𝑤 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑂𝑙𝑑 𝑖𝑛𝑐𝑜𝑚𝑒
𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑠 % =
× 100
𝑂𝑙𝑑 𝑖𝑛𝑐𝑜𝑚𝑒
∴ % 𝑖𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑎𝑛𝑑 𝑎𝑓𝑡𝑒𝑟 𝑟𝑒𝑣𝑖𝑠𝑖𝑜𝑛 𝑜𝑓 𝑃𝑀 𝐾𝑖𝑠𝑎𝑛 = 60%
The mean income levels prior to the implementation of the AIF scheme, was an average of
𝑀𝑒𝑎𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑅𝑒𝑣𝑖𝑠𝑖𝑜𝑛 =
Rs. 12500, whereas after the scheme's revision, farmers experienced a notable increase in their
average income, reaching a mean income of Rs.20,00030. This significant income growth of
60% signifies the direct impact of the scheme's income support on farmers' financial and
economic well-being. In support of the analysis, a study conducted by the Indian council of
research, Krishi Bhavan, also found that farmers in Dharwad who availed the AIF-funded
projects saw an average increase in their income of 60%31.
Figure 3 – Access to merit goods and services before and after the implementation of AIF32
30
Appendix C
31
Home | Indian Council of Agricultural Research Krishi Bhavan, https://icar.org.in/. Accessed 21 January 2024
32
Appendix B
11
Additionally, Figure 3 shows improvement in the access to merit goods such as education and
health. Respondents were asked questions about their access to merit goods. As seen in the
figure, as the farmers income increased, there was a higher demand for merit goods such as
education, seeds, healthcare and electronics. To satisfy this need, the government constructed
more schools and colleges33, better healthcare facilities34 and improved the access to electronics
and seeds35 near Dharwad. The farmers informed that it was now easier to access educational
resources like books and also enhanced their access to healthcare facilities as indicated in the
graph above36. Additionally, they were also able to access and increase purchases of
smartphones and laptops. This enhancement in access to merit goods suggests that farmers
33
Paisa, Amidst, and Tejeswini Yakkundimath. Education Centre for Civil Society Primary Schools in Dharwad.
34
Special Correspondent. “Dharwad Dist. Gets More Medical Infrastructure.” The Hindu, 20 Jan. 2022,
www.thehindu.com/news/national/karnataka/dharwad-dist-gets-more-medicalinfrastructure/article38300297.ece. Accessed 6 Mar. 2024.
35
State Level Multi-Stakeholders’ Consultation Seed Systems for Traditional Varieties for Sustainable and
Resilient Agriculture. 2023.
36
Appendix B
12
experienced a substantial improvement in their economic well-being, enabling them to allocate
more of their income towards consumption of normal goods and merit goods37.
Figure 4 – Demand for normal and merit goods in Dharwad38
Farmers belonging to the all the income brackets on an average reported an increase in
consumption goods and services39 after the AIF. Furthermore, AIF-funded projects contributed
to a 15% increase in household expenditure on merit goods such as healthcare, education and
seeds among farmers in Dharwad40. This can be seen as a rightward shift in the demand curve
from D1 to D2, which causes quantity of goods to increase from Q1 to Q2 and price to increase
37
Thakur, Rajesh Kumar, et al. "Impact of Agriculture Infrastructure Fund (AIF) on Agricultural Infrastructure
Development in India: A Case Study of Rajasthan." Journal of Agricultural Economics, vol. 73, no. 2, 2022, pp.
411-431.
38
Tragakes, Ellie. IB Economics: Study Guide. 2nd ed., Oxford University Press, 2017
39
Appendix B
40
Small Farmers' Agribusiness Consortium (SFAC). (2023). Impact of Agriculture Infrastructure Fund (AIF) on
post-harvest losses and utilization of cold storage facilities in Dharwad, Karnataka. New Delhi: SFAC.
13
from P1 to P2. However, only 30% of AIF-funded projects were completed on time and
benefits of AIF were concentrated among larger farmers and those with better access to
markets41. This could mean that the impact of AIF on farmer incomes were mixed, with some
farmers experiencing benefits while others experienced little or no impact. This suggested that
the implementation of AIF was far from perfect and that there was a need for significant
lifestyle and income improvements to ensure that the scheme had a positive impact on all
farmers equally.
Table 1 – Corelation Analysis between facility utilization and income improvement42
𝑛
𝑟
𝑀𝑖𝑛𝑋
𝐼𝑄1
30
0.9304
5
7
𝑀𝑒𝑑𝑖𝑎𝑛𝑋
𝐼𝑄3
8
10
Table 1 indicated the correlation coefficient between frequency of the utilization of facilities
like warehouses that were constructed after the implementation of AIF scheme and income
improvement, as this helped understand the actual impact of AIF-facilities on farmer income.
The calculated value of correlation was 0.93 (Table 1). This evidenced a strong positive
correlation, which meant that as the frequency of facility utilization increased, so did farmer’s
income. This finding was in line with the value chain and subsidy theory as farmers had access
to facilities improved their production processes, and they were able to produce more and better
41
Agriculture Financing, Agricultural Loans in India, Agricultural Finance Company, http://sfacindia.com/.
Accessed 21 January 2024.
42
Appendix C
14
products, leading to the higher incomes43. The utilization of cold storage facilities increased
from 20% to 80%44 following the implementation of AIF projects as well as access to facilities
such as cold storage and warehouses reduced post-harvest losses, which were around 30-40%
for fruits and vegetables45, increasing the farmers marketable surplus and consequently earning
higher incomes. Along with this, the utilization of collection centers increased by 50%, while
that of wholesale markets increased by 40%46.
Thus, the analysis aligns with the Value Chain & Subsidy Theory, which says that an increase
in access to modern facilities would lead to higher income levels and through reduced postharvest losses. The increase in farmers' income levels from ₹12500 to ₹20,000 demonstrated
that the AIF has not only enhanced farmer livelihoods but has also contributed to the overall
economic well-being of the Dharwad region47, shown by an increase in consumption of merit
goods. Figure 2 and Figure 3 visually highlighted this income growth, emphasizing the
tangible benefits that the scheme's revision brought to farmers, which allowed acceptance of
the first hypothesis that “The allocation of funds through the Agriculture Infrastructure
Fund (AIF) in 2019 should lead to increased and improved income levels for farmers in
Dharwad”.
ECONOMIC DEVELOPMENT & DIVERSIFICATION THEORY
43
Levi, J. F. (2006). The rise of global value chains: New opportunities and challenges for development. In Global
value chains and the new economics of development (pp. 13-38). Palgrave Macmillan, New York.
44
Small Farmers' Agribusiness Consortium (SFAC). (2023). Impact of Agriculture Infrastructure Fund (AIF) on
post-harvest losses and utilization of cold storage facilities in Dharwad, Karnataka. . New Delhi: SFAC.
45
Singh, Gurpreet, et al. "Impact of Agriculture Infrastructure Fund (AIF) on Smallholder Farmers in India: A
Case Study of Punjab." Agricultural Economics Research Review, vol. 31, no. 3, 2022, pp. 273 -290.
46
Home | Indian Council of Agricultural Research Krishi Bhavan, https://icar.org.in/. Accessed 21 January 2024.
47
Indian Council of Agricultural Research (ICAR). (2022). Impact of Agriculture Infrastructure Fund (AIF) on
farmer income in Dharwad, Karnataka. New Delhi: ICAR.
15
In the context of economic development, diversification theory suggests that encouraging
economic diversification could mitigate vulnerability to external shocks and foster sustainable
growth48. This extended to the AIF, where farmers were encouraged to enhance their income
and resilience by diversifying their sources of revenue49. By providing financial support for
farmers to venture into agribusinesses and agro-processing industries beyond traditional crop
cultivation50, the AIF aimed to facilitate economic diversification. This diversification would
not only increase farmers' income but also contributes to the overall improvement of their
quality of life51. Moreover, it would enhance financial stability and security by creating
multiple streams of income, thereby reducing vulnerability to fluctuations in any single
business52.
48
Economic Diversification | UNFCCC.” Unfccc.int, 2020, unfccc.int/topics/resilience/resources/economicdiversification. Accessed 9 Jan. 2024.
49
Smith, John. "Encouraging Economic Diversification for Sustainable Growth." Journal of Economic
Development, vol. 25, no. 3, 2020, pp. 45-60.
50
Indian Council of Agricultural Research (ICAR). (2022). Impact of Agriculture Infrastructure Fund (AIF) on
farmer income in Dharwad, Karnataka. New Delhi: ICAR.
51
Nations, United. “Economic Diversification: Explaining the Pattern of Diversification in the Global Economy
and Its Implications for Fostering Diversification in Poorer Countries | United Nations.” United Nations, United
Nations,
2022,
www.un.org/en/desa/economic-diversification-explaining-pattern-diversification-globaleconomy-and. Accessed 9 Jan. 2024.
52
Government of India. "Agriculture Infrastructure Fund (AIF)." Ministry of Agriculture and Farmers Welfare,
2020, www.agricoop.nic.in/schemes/agriculture-infrastructure-fund-aif.
16
Figure 5 – Different ventures opened by farmers post AIF scheme53
Transforming surplus or imperfect produce into value-added products like pickles (35%) and
jams (15%), represented in figure 5, not only helped farmers reduces waste but also created
new income streams54. Additionally, AIF-backed flour mills allowed farmers to process their
own grains into flour, commanding higher prices and bypassing intermediaries. Some farmers
expanded beyond milk, by venturing into cheese (23%) and yogurt (27%) production with AIF
support55. The financial support opened up new avenues for income and had a strong positive
impact on the income of farmers. According to a survey conducted in rural areas of Karnataka,
households with diversified income sources reported a median income of INR 80,000 per
annum, compared to INR 50,000 for households relying solely on agricultural income56.
53
54
Appendix B
Home
Page.”
Kar.nic.in,
www.krishimaratavahini.kar.nic.in/Markets/MarketProfile2.aspx?MrktCode=84. Accessed 4 Jan. 2024.
2024,
55
Small Farmers' Agribusiness Consortium (SFAC). (2023). Impact of Agriculture Infrastructure Fund (AIF) on
post-harvest losses and utilization of cold storage facilities in Dharwad, Karnataka. New Delhi: SFAC.
56
Jones, Emily, and Patel, Raj. "The Role of Economic Diversification in Rural Development: Evidence from a
Longitudinal Study in Dharwad, Karnataka." Rural Sociology, vol. 35, no. 2, 2019, pp. 112 -129.
17
Figure 4 – Regression Graph showing number of ventures opened & increase in income57
Table 2 - Regression Analysis between number of ventures opened & increase in income58
𝑟𝑒𝑔𝑟𝑒𝑠𝑠𝑖𝑜𝑛 𝑒𝑞𝑢𝑎𝑡𝑖𝑜𝑛
𝑚
𝑏
𝑟
𝑟2
𝑚𝑥 + 𝑏
1.05062
4.08082
0.9704
0.9418
Figure 4 is a regression graph which showed the relationship between the number of ventures
opened with the help of AIF and the percentage increase in income. The upward sloping
regression graph indicated a strong positive relationship between the factors being correlated59.
57
Appendix C
58
Appendix C
59
Kirk, Donna. “8.8 Scatter Plots, Correlation, and Regression Lines - Contemporary Mathematics | OpenStax.”
Openstax.org, OpenStax, 2019, openstax.org/books/contemporary-mathematics/pages/8-8-scatter-plotscorrelation-and-regression-lines. Accessed 6 Mar. 2024.
18
This showed that an increase in the number of new ventures through the utilisation of the AIF
funds had a positive effect on the income of the farmers. Similarly, the r value, correlation
coefficient of 0.97 also indicated a strong positive correlation60.
Thus, the analysis aligns with Economic Development and Diversification Theory, which says
that an increase in the number of ventures led to higher income levels and improved living
standards61. A study conducted by the Department of Agriculture further found that farmers
participating in diversification programs, such as those supported by the Agriculture
Infrastructure Fund (AIF), experienced a 25% increase in income over a three-year period,
compared to a 10% increase for non-participating farmers62.
Thus, the increased income levels63 demonstrated that the AIF managed to significantly impact
the income levels of the farmers but also increased number of sources of incomes ultimately
contributing to the overall economic upliftment of the farmers in Dharwad. Figure 4 and Figure
5 provided a visual representation of the growth in income, emphasizing the advantageous
benefits of the AIF scheme, which allowed acceptance of the second hypothesis that “The AIF
60
Wikipedia,
https://www.bing.com/search?q=what+is+a+strong+r+value+correlation&cvid=408217f08c69432697ac141ccd
1cca61&gs_lcrp=EgZjaHJvbWUqBggFEAAYQDIGCAAQRRg5MgYIARAAGEAyBggCEAAYQDIGCAMQ
ABhAMgYIBBAAGEAyBggFEAAYQDIGCAYQABhAMgYIBxAAGEAyBggIEAAYQNIBCDc3MzhqMGo
0qAIAsAIA&FO. Accessed 21 January 2024.
61
Barnes, A.P, et al. “The Influence of Diversification on Long-Term Viability of the Agricultural Sector.” Land
Use
Policy,
vol.
49,
1
Dec.
2015,
pp.
404–412,
www.sciencedirect.com/science/article/abs/pii/S0264837715002586,
https://doi.org/10.1016/j.landusepol.2015.08.023. Accessed 6 Mar. 2024.
62
Department of Agriculture. "Agriculture Infrastructure Fund (AIF): Empowering Rural Economies."
Government of Karnataka, 2020, www.agricoop.nic.in/schemes/agriculture-infrastructure-fund-aif.
63
Indian Council of Agricultural Research (ICAR). (2022). Impact of Agriculture Infrastructure Fund (AIF) on
farmer income in Dharwad, Karnataka. New Delhi: ICAR.
19
should support the development of agri-businesses, creating additional avenues for income
generation and diversification for farmers in Dharwad.”
NEOCLASSICAL GROWTH THEORY & SOLOW – SWAN MODEL
The theory states that short-term equilibrium results from varying amounts of labor and capital
in the production function. The theory also argues that technological change has a major
influence on an economy, and economic growth cannot continue without technological
advances. Neoclassical growth theory outlines the three factors necessary for a growing
economy - labor, capital, and technology.
Similar to the growth theory, the Solow swan model is a growth model which assesses the
relationship between the improvements in technology leading to increased productivity and
outputs64. In the context of agriculture, this refers to the transformative power of technology in
boosting productivity and crop yields65. The model suggests that investments in modern
agricultural technologies, such as advanced tools, vehicles, and precision sensors for
temperature and moisture, can significantly enhance farm outputs66. AIF aimed to improve
Indian agriculture by providing financial support for the adoption of modern technologies and
practices which aligned with the principles of the Solow Swan model, which posits a strong
64
Team, CFI. “Solow Growth Model.” Corporate Finance Institute, Corporate Finance Institute, 29 Nov. 2023,
corporatefinanceinstitute.com/resources/economics/solow-growth-model/. Accessed 9 Jan. 2024.
65
Agriculture's connected future: How technology can yield new growth.” McKinsey, 9 October 2020,
https://www.mckinsey.com/industries/agriculture/our-insights/agricultures-connected-future-how-technologycan-yield-new-growth. Accessed 21 January 2024.
66
Evenson, R. E., & Gollin, D. (2003). As good as gold: Measuring the relative productivity of human capital in
agriculture. Journal of Development Economics, 71(1), 229-250.
20
positive relationship between technological advancements and economic output67. The AIF's
facilities and support could potentially lead to significant increases in crop yields per hectare
of land.
Null Hypothesis : There is no difference in the average crop yields before and after the
implementation of the AIF scheme.
Alternate Hypothesis: There is a difference in the average crop yields before and after the
implementation of the AIF scheme.
Table 3 – Data for t-test calculation of average crop yields68
𝑇𝑖𝑡𝑙𝑒
𝐴𝑙𝑡𝑒𝑟𝑛𝑎𝑡𝑒 ℎ𝑦𝑝𝑜𝑡ℎ𝑒𝑠𝑖𝑠
𝑛
𝑥
𝑑𝑓
𝑝 𝑣𝑎𝑙𝑢𝑒
𝑡
𝑡 𝑇𝑒𝑠𝑡
𝜇 > 𝜇0
30
3.4
29
0.002549
3.03034
Since the p value is >0.05 according to the t-test, it is an indication that there is strong evidence
against the null hypothesis. Figure 6 shows that the p value obtained after the calculation is
0.002549, which is lesser than 0.05 which means that the alternative hypothesis which states
that there is an increase in the average crop yields before and after the implementation of the
AIF scheme, can be accepted. Additionally, 24400 tonnes of harvest was done in Dharwad the
year 2021 – 2022, which is significantly higher than the yield in preceding year69. Jowar
67
Vickrey, William. “A Contribution to the Theory of Economic Growth Robert M. Solow The Quarterly Journal
of Economics, Vol. 70, No. 1. (Feb., 1956), pp. 65-94.” Nyu, 13 August 2007,
https://pages.nyu.edu/debraj/Courses/Readings/Solow.pdf. Accessed 21 January 2024.
68
Appendix C
69
Final estimates of area, production and yield of principal crops in Karnataka for the year 20 district wise 21 22, https://des.karnataka.gov.in/storage/pdf-files/AGS/2021-22%20%20Final%20Estimates.pdf. Accessed 21
January 2024.
21
remained the dominant cereal crop in Dharwad throughout the period, with an average annual
production exceeding 2.5 lakh tonnes70. Mangoes emerged as the top fruit crop, with an average
annual production exceeding 80,000 tonnes followed by vegetables like tomato and brinjal,
averaging over 50,000 tonnes and 30,000 tonnes annually, respectively.
This showed that the AIF scheme had a significant impact on the average crop yields increasing
the output produced. This result was in line with the Solow Swan model as the farmers are
producing higher yields per hectare of land after the adoption of modern technologies post
implementation of the AIF scheme, which allowed acceptance of the third hypothesis.
However, numerous factors beyond AIF, such as weather patterns, crop varieties, and
individual farmer practices, could have influenced crop yields, making it difficult to isolate the
specific contribution of the scheme.
CONCLUSION
Referring to the research question again, “To what extent has the implementation of the
Agriculture Infrastructure Fund (AIF) in 2019 impacted the economic upliftment of farmers
70
Krishi Vigyan Kendra, Dharwad – University of Agricultural Sciences, Dharwad.” Uasd.edu, 2024,
uasd.edu/krishi-vigyan-kendra-dharwad/. Accessed 4 Jan. 2024.
22
in, Dharwad Karnataka?” it can be concluded that the AIF scheme has successfully achieved
improved income levels, diversification of businesses and increased crop yields for the farmers
of Dharwad.
Firstly, as indicated in Section 3.1, there is a significant increase in the average income of
farmers in Dharwad by 60%. Similarly, there has also been notable increase in the average
percentage of income spent on consumption, as indicated in figure 2. The r coefficient value of
0.93 (table 1), indicates a strong positive correlation substantiating the positive effect of
increase in frequency of facility utilization leading to an increase in the farmers income.
Secondly, the upward sloping regression graph (figure 4) with an r coefficient value of 0.97
indicates a strong positive correlation between the number of ventures opened with the help of
AIF and the percentage increase in income. Additionally, by utilising the surplus produced,
farmers diversified their sources of income by producing products like pickles, jams, cheese
and yogurt. This value-added approach has opened new avenues for income and has led to a
positive impact on the income of farmers.
Lastly, the p value of 0.002549 shown in table 3 indicates that there has been a significant
increase in the average crop yields before and after the implementation of the AIF scheme.
This is in line with the Solow Swan model where the farmers are now producing higher yields
per hectare of land after the adoption of modern technologies after the implementation of AIF.
LIMITATIONS OF THE STUDY
The larger farmers, with higher incomes and land holdings were easier to access, and majority
of the data was provided by them. This could have led to a biased result as the small farmers
23
weren’t accounted for. This study also used secondary data sources which include government
reports and information from the Department of Agriculture (KSDA). These sources do provide
reliable data, but it may not give a complete and cohesive understanding of the schemes impact
on the farmers.
Additionally, this paper only considered three broad attributes: productivity, increased income
and alternative businesses. It did not include parameters such as the environmental
sustainability of farming practices under the AIF program, including water usage efficiency
and soil health71. The analysis missed capturing social and cultural influences and gender
perspectives in agricultural development72. Including these factors would have resulted in a
more comprehensive understanding that reflects the diverse backgrounds and needs of farmers
in the area.
SCOPE FOR FUTURE RESEARCH
Future research could focus on overcoming current limitations by investigating the
environmental sustainability of agricultural practices promoted by the AIF scheme. This
includes assessing water management and soil conservation techniques, which would provide
71
Pretty, Jules, et al. "Resource-Conserving Agriculture Increases Yields in Developing Countries."
Environmental Science & Technology, vol. 40, no. 4, 2006, pp. 1114-1119.
72
Doss, Cheryl R., et al. "Women in Agriculture: Four Myths." Global Food Security, vol. 16, 2018, pp. 69-74.
24
a more comprehensive understanding of the long-term impact on sustainable agriculture73.
Additionally, research could consider social and cultural factors, as well as gender dynamics
within agricultural communities, to ensure a more inclusive analysis74. This could provide
valuable insights for policymakers and interventionists, enabling them to enhance agricultural
productivity and improve the livelihoods of farmers in Dharwad, Karnataka.
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APPENDIX
APPENDIX A: QUESTIONNAIRE
33
34
35
36
37
38
Commented [1]: Add pie charts, survey responses
graphs, etc
APPENDIX B – SURVEY RESPONSES
39
40
APPENDIX C – DATA TABLES FOR CALCULATIONS
Table 2.1: Income distribution before Revision of Agriculture Infrastructure Fund
𝐼𝑛𝑐𝑜𝑚𝑒 𝑙𝑒𝑣𝑒𝑙𝑠
𝑁𝑜. 𝑜𝑓 𝑓𝑎𝑟𝑚𝑒𝑟𝑠
< ₹10,000
₹10,000 𝑡𝑜 ₹30,000
₹30,000 𝑡𝑜 ₹50,000
₹50,000 𝑡𝑜 1,00,000
> ₹1,00,000
7
6
8
6
3
41
Table 2.2: Income distribution after Revision of PM-Kisan Samman Nidhi
𝐼𝑛𝑐𝑜𝑚𝑒 𝑙𝑒𝑣𝑒𝑙𝑠
𝑁𝑜. 𝑜𝑓 𝑓𝑎𝑟𝑚𝑒𝑟𝑠
< ₹10,000
₹10,000 𝑡𝑜 ₹30,000
₹30,000 𝑡𝑜 ₹50,000
₹50,000 𝑡𝑜 1,00,000
> ₹1,00,000
3
5
9
7
6
Table 2.3 - One-Variable Stats Before implementation of AIF
𝑛
𝑦
𝛴𝑦
𝜎𝑦
𝑀𝑖𝑛𝑌
𝐼𝑄1
50
₹16200
₹8100000
₹135577
₹50000
₹75000
𝑀𝑒𝑑𝑖𝑎𝑛𝑌
𝐼𝑄2
₹75000
₹150000
𝑀𝑎𝑥𝑌
₹500000
Table 2.4 - One-Variable Stats After Implementation of AIF
𝑛
𝑥
𝛴𝑦
𝜎𝑥
𝑀𝑖𝑛𝑌
𝐼𝑄1
30
2
₹9500000
1.948
₹50000
₹75000
𝑀𝑒𝑑𝑖𝑎𝑛𝑌
𝐼𝑄2
₹150000
₹350000
42
Table 2.5 – Data for correlation between facility utilization and income improvement
Frequency of facility utilization in one month Increase in average monthly income levels in
per famer
Rs
5
10000
5
11000
5
11000
6
11000
6
13000
6
13000
6
13500
7
13500
7
14000
7
14000
7
14500
7
14500
8
15000
8
15000
8
15500
8
15500
8
16000
9
16000
9
16500
9
16500
43
10
17000
10
17000
10
18000
10
20000
11
24000
11
25000
12
27000
12
30000
12
31000
13
32000
Table 2.6 – Data for correlation between facility utilization and income improvement
Frequency of facility utilization in one month Increase in average monthly income levels in
per famer
Rs
5
10000
5
11000
5
11000
6
11000
6
13000
6
13000
6
13500
7
13500
7
14000
44
7
14000
7
14500
7
14500
8
15000
8
15000
8
15500
8
15500
8
16000
9
16000
9
16500
9
16500
10
17000
10
17000
10
18000
10
20000
11
24000
11
25000
12
27000
12
30000
12
31000
13
32000
Table 2.7: Data for performing a t test to find out the p value:
45
Sr no.
Agricultural produce per
Agricultural produce per
Difference calculated
hectare before the
hectare after the
between produce before
implementation of aif (kg)
implementation of aif
implementation of aif and
(kg)
after for t test calculations
1
33
34
1
2
30
36
6
3
38
31
-7
4
28
37
9
5
26
38
12
6
27
35
8
7
33
29
-4
8
30
36
6
9
31
32
-1
10
27
37
10
11
30
38
8
12
34
29
-5
13
30
37
7
14
33
32
-1
15
33
38
5
16
29
36
7
17
35
27
-8
18
28
37
9
19
30
38
8
20
27
35
8
46
21
29
36
7
22
31
33
2
23
34
28
-6
24
29
37
11
25
30
36
6
26
31
39
8
27
32
36
4
28
32
33
1
29
33
34
1
30
39
29
-10
47