Pro-Poor Public Investment Program

MOTIVATION

Where should a country invest its money? How policymakers answer this complex question can have an impact on the welfare of their constituents—especially those living in poverty—for generations to come. From 1998 to 2002, IFPRI’s Pro-Poor Public Investment Program provided data on India’s public investments. Research results of this program included three major findings. First, initial subsidies for credit, fertilizer, and irrigation were crucial in the early days of the Green Revolution. These subsidies helped small farmers adopt new technologies. However, the benefits from subsidies soon diminished once adoption was widespread. Research has shown that in recent decades, the subsidy has cost far more than the benefits it generated. Second, agricultural research, education, and rural roads were the three most effective public-spending items for promoting agricultural growth, and this is as true today as during the Green Revolution. Finally, the trade-off between agricultural growth and poverty reduction is generally small among different types of investments, with agricultural research, education, and infrastructure development consistently showing the largest win-win outcomes.

OUTCOMES

The program produced a series of research reports used by national and regional policymakers in India to evaluate the impact of public investment in different sectors and set future investment priorities:

• An external impact assessment found that IFPRI’s public investment work in India yielded many positive results:
  • Rural Roads Program: Published research in India played a key role in the institution of the Prime Minister’s Rural Roads Program (PMGSY), which directed substantial sums of money toward the construction of roads that connected large numbers of previously unserved villages. Quantitative assessment of the positive impacts from these road investments indicates that they lifted hundreds of thousands of people out of poverty and added substantially to agricultural GDP. IFPRI can reasonably be credited with part of these gains because the Institute has influenced placing road construction high on the agenda of spending priorities in both the Tenth (2002–2007) and Eleventh (2007–2012) Five-Year Plans
  • Agricultural Research and Development: There was general consensus that IFPRI’s findings  regarding the beneficial impacts of agricultural research and development on growth and poverty alleviation have been part of the wider policy conversation, particularly in the run-upto the Eleventh Five-Year Plan (2007–2012). For example, members of the Steering Committee on Agriculture and Allied Sectors—a group charged with making recommendations to the Planning Commission in 2007—stated that IFPRI’s research was "central" to the group’s recommendation of increased investments in agricultural research institutions (India Planning Commission 2007).
  • Subsidy Policies: An IFPRI paper (Fan and Gulati 2008), published in the widely read Economic and Political Weekly had a particularly high profile. One person interviewed suggested that the article had been influential within the Prime Minister’s Economic Advisory Council and that this influence was reflected in a subsequent Economic Survey. Support for this contention is found in the following passage taken from the recommendations of the Steering Committee on Agriculture and Allied Sectors (India Planning Commission 2007, p. 28): "Burgeoning subsidies are thus competing for scarce resources impinging upon the government’s ability to invest...in crucial areas like irrigation and other infrastructure. Some studies show that a rupee going into public investments is several times more productive in terms of output growth than when it is deployed as a subsidy." The "studies" mentioned in the second sentence of this quote refer to IFPRI’s research.