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Madhya Pradesh: Does Agriculture Determine the State’s Growth Trajectory?

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  • Amey Sapre

    (The author is a doctoral student in economics at the Indian Institute of Technology (IIT), Kanpur, Uttar Pradesh, India, email: amey@iitk.ac.in)

Abstract

This article empirically analyses whether agricultural growth performance determines the growth trajectory of the economy of an Indian state, namely Madhya Pradesh. Long-term growth trends of nearly three decades (1981–2011) in Madhya Pradesh show that fluctuations in agricultural growth and Gross State Domestic Product (GSDP) clearly coincide and have a considerable impact on the overall growth of the state’s economy. In examining this, the agricultural terms of trade are first introduced to capture the relative price responsiveness of agricultural supply in the state. Structural breaks, cointegration and an error correction mechanism are used to explore the long-term relationship between terms of trade, agricultural growth and GSDP growth. Findings show that agricultural fluctuations explain nearly half of fluctuations in the growth of the state economy while agricultural supply remains responsive to price and economic incentives. The analysis suggests that agricultural growth performance remains central to achieving any higher growth trajectory for the state. JEL Classification: C22, C50, Q11, Q18

Suggested Citation

  • Amey Sapre, 2014. "Madhya Pradesh: Does Agriculture Determine the State’s Growth Trajectory?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(1), pages 39-57, February.
    • Handle: RePEc:sae:mareco:v:8:y:2014:i:1:p:39-57
    DOI: 10.1177/0973801013506400
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    References listed on IDEAS

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    More about this item

    Keywords

    Terms of Trade; Agriculture; Structural Breaks; Supply Elasticity; Cointegration; Error Correction Model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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