Efficiency and Productivity in Indian Agriculture: A Stochastic Frontier Approach

Abstract

This paper addresses the issues of technical efficiency, total factor productivity and its convergence for cereal crop production in Indian agriculture using district level data over twenty-five years from thirteen major states. We estimate a stochastic frontier model to analyze technical efficiency after controlling for the district specific and climatic impact in the production of cereal crops. Our result documents that infrastructural (physical as well as social) development can raise efficiency in cereal production. The policy of licence raj (1:4 policy) introduced in the banking secor has reduced efficiency. The estimated average efficiency scores for the Indian states show the varying nature of the relative performance of the states. The result from the calculated Malmquist index of total factor productivity (TFP) provides the evidence that efficiency change results in fluctuation of TFP change, although the share of technical change in substantial. The tests for conditional as well as unconditional convergence show that productivity in Indian districts tend to converge in case of wheat, rice, bajra and jowar; but not in case of maize and aggregate crop. cereal crops.

Keywords: Efficiency, Total Factor Productivity, Convergence, India

JEL Classification: D24, O13, Q10