Relationship of Consumption and Production in Changing Agriculture: A Study in Surat Dist. India - A Summary

This is a summary of the study entitled “Relationship of Consumption and Production in Changing Agricultural: A Study in Surat District, India” published in the occasional paper series of the Technological Change in Agriculture Project at the Department of Agricultural Economics, Cornell University. The summary reports the objectives, analytical and methodological approach, data and the main findings of this study. The study assumes that at the beginning of a crop-year the farmers’ consumption and production decisions are recursive instead of simultaneous. This is because income from crops accrues only at the end of a crop-cycle, while consumption is continuous. The study further argues that crop-pattern is the single most important determinant of farmers’ working capital investment and income decisions. Hence the study considers it more important to explain crop-pattern rather than intensity of a given crop. Finally, both dairy plus non-farm income and consumption being continuous in character, can form net family capital that would influence, among other factors, the crop-pattern. This linkage between family finance and crop-pattern is justified because under conditions of inadequacies of capital market and risks credit may not be perfectly substitutable for internal finance. Considering these assumptions, a four-part econometric model is presented. The four parts are dairy-farming, crop-farming, level and pattern of aggregate consumption. For empirical application of the model, data for agricultural years 1969-70, and 1970-71 from a group of farm-families of Surat District are utilised.