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1.3 Why Scaling-up of Production Matters for Pro-poor and Sustainable Growth Policies

India alone has over 350 million people living below the poverty line. In India, as elsewhere in developing countries, most of the poor live in rural areas and depend on agriculture for their livelihoods (World Bank, 2002). In general, poor rural households are characterized by small farms, low levels of education, lack of liquidity, modest use of agricultural inputs, low opportunity cost of labor, and limited access to markets. Agricultural development will need to be part of any development solution to both poverty and environmental sustainability, both because of its direct impact on incomes, but also because of indirect effects in rural areas on demand for local items produced by the poor.

Because high-value agricultural commodities are the only part of developing country agriculture growing faster than 1 percent per capita per annum (meat and fish demand have grown at about 3.7 percent per annum per capita over the last 20 years), there is in an average sense not much future for smallholder agriculture if smallholders cannot participate in livestock and fishery activities.

Furthermore, small farmers often have some cost advantages in producing high-value meat, egg, and milk commodities relative to large-scale producers (Delgado and Minot, 2003):

On the other hand, rising market share in developing countries for larger-scale producers of pork, eggs, and poultry meat (Delgado and Narrod, 2002) suggest that other factors may be prevailing in determining who in developing countries is able to capture the fast expanding market:

All of these issues are empirical in nature, generally not comprehensively investigated to date, require different policy responses depending on which forces are more important in driving scaling-up, and are important in promoting poverty reduction and environmental sustainability.

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