Price and Non Price Determinants of Rice Supply Response in South India

Rice is the dominant staple food and the major source of rural livelihood in South India. Along with crop sub-sector as a whole, however, the rice production too is experiencing profit squeeze from rising input cost and declining farm size due to growing rural population. The production and productivity growth in rice is lagging behind with the changes in agriculture production portfolio in the region during 1990’s. This study examines supply response of rice to various price and non-price factors using district level panel data from 1970-71 to 2007-08 for the southern states of Andhra Pradesh and Tamil Nadu in India. The two states together account for about 20 % of rice production in India and thus have an important bearing on the food security of the country. The district level panel data are analyzed using simultaneous equation model. Empirical results indicate that public investments in rural infrastructure, rural literacy, and technology have strong effects on long run rice supply response in South India. The long run output supply elasticity with respect to its own price is strong but has a lower elasticity compared to non-prices factors including climatic variables. Thus, long run productivity and production growth in rice is possible through investments in rural infrastructure and technology along with provisions for input supply and market development. Improvements in investment priority will strengthen mitigation to climate factors and provide long run incentive to farmers to invest their labor and capital in rice production in the region.