Accelerating Agriculture and Rural Development for Inclusive Growth: Policy Implications for Developing Asia

Developing Asia stands witness to the impact of economic growth on poverty reduction. The incomes and quality of life for many people have improved and poverty levels are falling. But results vary with rural growth lagging behind urban growth in many countries and subregions. Two thirds of the region's 3 billion people live in rural areas, and in India, for example, 74 percent of people classified as poor are in rural areas (ADB 2004). The difference in urban and rural growth and poverty outcomes is socially and politically untenable, as witnessed in the recent election in India. Rural poverty problems in many cases become urban poverty problems through rising pressure on cities to absorb rural migrants needing jobs, homes, and services. Pre-1980s, the rural economic problem was commonly seen as undersupply of affordable food and raw materials to support industrialization as the engine of rapid growth. The strategy greatly influenced the design and choice of public policies. Overvalued exchange rates were intended to help new industries establish domestic markets and lower costs of imported materials, but lowered the domestic currency earnings for farmers in export markets. Administered food prices lowered consumer prices but lowered returns to farmers as well. Agricultural commodities and land were heavily taxed to force the transfer of resources out of rural areas. Farm input subsidies encourage production of food crops but lead to resource wastage, and often benefit well-to-do farmers. Such policy biases lower agriculture's terms of trade, distort market signals, and undermine agricultural growth (Krueger 1992).In the above back setting. An attempt is made to briefly outlines the potential for agriculture and rural development as a critical force for inclusive growth and sustained poverty reduction and reviews experiences in the Asian region with agriculture in economic transformation. It highlights major policy challenges for accelerating agriculture and rural development.