Sharmistha Nag1, Debarpita Roy2, Laxmi Joshi3, P. C. Parida4, Hari K. Nagarajan5

(1. Fairleigh Dickinson University, Canada; 2. Amity University, India;

3. National Council of Applied Economic Research, India;

4. Institute of Applied Manpower Research (IAMR), India;

5. Rural Economics Institute of Rural Management, India)

 

 

Abstract: In 2012-2013 the share of agriculture and allied activities declined to about 13.7 percent of India’s GDP1. Due to rising competition in international markets and increasing costs of production, sustaining efficiency in farm production necessitates estimation of both technical and economic efficiencies. In this paper, we examine India’s agrarian performance in terms of restricted profit functions and factor demand equations, using village-level panel data for years 1999 and 2006. We also attempt to decompose output growth between the two periods into technical progress, technical efficiency, and input growth using a translog production function following Kalirajan, Obowa and Zhao (1996) to examine whether output growth was input-driven or technology driven. The decomposition analysis is important from a policy perspective to understand whether the given technology has been applied to its full potential. We find that the technical change between 1999 and 2006 has been negative, while the technological progress is positive, therefore we can infer that full potential of technological change between 1999 and 2006 could not be leveraged due to the decline in technical efficiencies. To fully leverage the same, policy prescriptions should target increasing farm level technical efficiencies.

 

 

Key words: agriculture; factor demand; total factor productivity growth; technical efficiency

 

JEL codes: Q1, D24, P27, O13