BREAD Working Paper No. 243, June Pranab Bardhan, Dilip Mookherjee, and Neha Kumar (2009)

A study of West Bengal farms finds that both public initiatives and private investment in irrigation were drivers of the region’s spectacular growth in agricultural productivity.

In the 1980s and 1990s, the east Indian state of West Bengal achieved spectacular rates of agriculture productivity growth.  This growth attracted the attention of many scholars, some of whom saw state programs such as tenancy registration, the granting of land titles to the poor, and farm extension services such as subsidized minikits, credit, and public employment as responsible for these gains, while others attributed West Bengal’s success to private investment in irrigation. 

The case appeared, in other words, to be a classic debate over the efficacy of public versus private measures in development.  In setting out to “disentangle the respective roles of land reform, farm extension services and private irrigation investments in explaining farm productivity growth,” Bardhan, Mookherjee, and Kumar find that West Bengal’s public and private factors were complementary. 

Initial state programs stimulated subsequent private investment in irrigation.

The authors analyze a randomly selected panel dataset of 743 farms in 15 of West Bengal’s agricultural districts from 1982-1995.  The data included cost-of-cultivation surveys with annual figures on acreage, output, and input expenditures, as well as village surveys on local government structure, budget, and expenditure. 

Findings indicate that tenancy reform had a significant negative impact on per acre irrigation cost.  This finding holds with both standard ordinary least squares regression and instrumental variables regression that controls for endogeneity. 

State provision of irrigation minikits also increased private investment and drove down the price of irrigation.  The effect of these measures was stronger for non-tenant farms than tenant farms.  Credit and employment programs did not have a significant impact on irrigation investment.

The authors suggest that these effects worked through two channels: “induced effects on investment in groundwater capacity by water sellers” and “enhanced availability of cheap institutional credit to registered tenants which facilitated irrigation investment” and led to more water being sold.  Overall agricultural productivity gains were much greater than what would have been expected from West Bengal’s public reforms alone.  Therefore the authors conclude that “The general picture suggested by our study is that institutional reforms implemented by local governments stimulated private investment in irrigation, which in turn increased farm productivity.  Both tenancy reforms and delivery of minikits played a key role in this respect.”  In this sense West Bengal’s green revolution was not a product of public investment alone, but rather complementary public and private investment in irrigation with a role for the public sector as a catalyst.