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Relative Profitability, Supply Shifters and Dynamic Output Response:The Indian Foodgrains

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  • SUNIL KANWAR

    (Delhi School of Economics)

Abstract

The realisation that the wage-goods constraint, if binding, could stall the growth process of a developing country, prompted policy makers to encourage agriculture by various means. The success of public policy depends, however, on how strongly farmers respond to the incentives provided. Using a large panel dataset pertaining to Indian agriculture - spanning the period 1967-68/1999-00, and covering the 6 important food crops cultivated across 16 major states - we provide estimates of area, yield and output elasticities w.r.t price and nonprice factors. We find consistent evidence, that the supply response of food crops is influenced by rainfall, input availability (specifically irrigation, fertilizer and improved seeds), and relative profits, in that order of importance. Our results prompt us to conclude, that all things considered, the preferred policy should be to encourage irrigation, fertilizer use and the use of modern seeds, rather than raise output support/procurement prices period after period.

Suggested Citation

  • Sunil Kanwar, 2004. "Relative Profitability, Supply Shifters and Dynamic Output Response:The Indian Foodgrains," Working papers 133, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:133
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    Cited by:

    1. Bhaduri, Anik & Amarasinghe, Upali A. & Shah, Tushaar, 2009. "Groundwater expansion in Indian agriculture: past trends and future opportunities," IWMI Books, Reports H042039, International Water Management Institute.
    2. Maximilian Auffhammer & V. Ramanathan & Jeffrey Vincent, 2012. "Climate change, the monsoon, and rice yield in India," Climatic Change, Springer, vol. 111(2), pages 411-424, March.
    3. Mahal, Ajay & Karan, Anup K., 2008. "Adequacy of dietary intakes and poverty in India: Trends in the 1990s," Economics & Human Biology, Elsevier, vol. 6(1), pages 57-74, March.

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    More about this item

    Keywords

    wage-goods; price incentives; supply shifters;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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