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Sources of Output Growth in Indian Agriculture during the Post-Reform Period

  • K.R. Shanmugam

    (MSE)

  • Vidhya Soundararajan

Economic growth has failed to be sufficiently inclusive, particularly after the mid-nineties. Although agriculture is still a single major sector providing livelihood to more than 60 percent of the population, it has lost its growth momentum and the share has been declining continuously for a variety of reasons like low income due to inadequate output growth, low productivity, lack of credit at reasonable rates, natural calamities and unavailability of proper extension services. Realizing the importance of this sector and its current crisis, the Eleventh Plan aims to reverse this trend. Output growth could be possible by increasing input growth, technical progress and improvement in technical efficiency. In order to identify the source of the problem, this paper attempts to decompose the agricultural output growth obtained in 15 major states for the period 1994-95 to 2003-04 into the above three components using the random coefficients frontier production function model. Results of the study indicate that the efficiency has declined over time for all the states and the average technical efficiency is only 72 percent. This means that there is a potential to increase the existing output by 28 percent without increasing inputs.We found that inmost of the states, growth was only due to higher inputs. Investment in extension services along with sustained investment in agricultural research and development, and infrastructure is the need of the hour. West Bengal is the most efficient state in applying labor and fertilizer inputs and also has a very high over all efficiency. This can be linked to the successful land reform policies of the state.

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File URL: http://www.eaber.org/node/22515
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Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22515.

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Date of creation: Jan 2008
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Handle: RePEc:eab:develo:22515
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org

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  1. Kaliappa Kalirajan & Shashanka Bhide, 2004. "The Post-reform Performance of the Manufacturing Sector in India," Asian Economic Papers, MIT Press, vol. 3(2), pages 126-157.
  2. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  3. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
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