WELCOME NIYAS.N

A.VADOOD.K ANAS .MV

FAHAD. P SUMESH.TP

AGRICULTURAL GROWTH IN INDIA- A PRODUCTION FUNCTION ANALYSIS RELATED TO

PRE AND POST LIBERALISATION PERIODS

CONTENT

INTRODUCTION REVIEW OF LITERATURE METHODOLOGY OBJECTIVES ANALYSIS & INTERPRETATION FINDINGS & CONCLUSION

INTRODUCTION

Agriculture plays an important role in Indian economy due to its contribution to income and employment generation, forex earnings, industrial growth and production of food.

Policy makers in India gave priority to agricultural sector in all the time.

An urgent need of agricultural and food grain production to provide food security to a raising population brought reforms namely liberalization in 1991

This study analyses the impact of various policies like liberalization and NAP on total output and factors of production.

The study analyses two time spans to arrive at conclusion. i.e., pre-liberalization period and post-liberalization period.

In general pre-reform period is characterized by green revolution, land reforms, investment in irrigation, high yielding verities and new seed fertilizers.

Post-reform period is characterized by borderless movement of factors of production.

The study analyses the impact of NAP in export and import of agricultural products.

REVIEW OF LITERATURE Shanmugam and Soundaranjan (2008):-

Analyzed the sources of output growth in Indian agriculture during the post-reform. The study is based on the secondary data gathered from Central Statistical Organization, Center for Monitoring the Indian Economy and Census of India (1991,2001). They have employed frontier production function technique to measure the extent of Technical Efficient (TE) of raising agricultural outputs in India using state level panel data for the period, 1994-1995 to 2003-04.

They found that the Mean Technical Efficiency in the post reform period is roughly 72%, indicating a scope for raising output without additional resources. Technological progress and Technical efficiency are two key sources of agricultural growth, has been decline in recent period.

They suggested that instead of providing input subsidies, the government should spend more effectively on infrastructure, investment in research & development. It also necessary to invest information dissemination tools, which can be provided a new channel of agricultural growth for India.

Shinoj and Mathur (2008):- Analyzed India’s comparative advantage in exports of

major agricultural commodities with respect to Asia and to compare it with that of other major Asian exporters. The study is based on secondary data collected from various issues of FAO trade year book, published by the statistics division of food and agriculture organization, Rom. They have used the revealed symmetric comparative advantage to look into the comparative advantage of the selected commodities.

The study showed that exports of certain commodities like cashew and oil meals, India has been also to maintain its comparative advantage, but several other commodities like tea, coffee , spices, marine products etc, have been negatively affected. India has been found losing out its comparative advantage in exports of some of the agriculture commodities to other Asian competitors during the period after economic reforms.

OBJECTIVES

To check whether there is any change in output and factors of production due to liberalization.

To assess the changes in the agricultural export and import in India, pre and post implementation of NAP (National Agricultural Policy) 2000-01

METHODOLOGY

Model 1:- Production function approach on full period (1950-51 to 2010-11)

Dependent Variable:- Agricultural OutputIndependent variables:- Area of production Consumption of fertilizer use of pesticides

Model 2:-Production function approach on Pre-liberalization period (1971-72 to 1990-91):-

Dependent Variable:- Agricultural OutputIndependent variables:- Area of production,

Consumption of fertilizer, use of pesticides

Model 3:-Production function approach on Post-liberalization period (1991-92 to 2010-11):-

Dependent Variable:- Agricultural OutputIndependent variables:- Area of production,

Consumption of fertilizer, use of pesticides

Source of data

The study based entirely on secondary data available. The major sources of data are:-

Handbook of statistics on Indian economy (RBI)

Agricultural statistics at a Glance published by the Ministry of Agriculture.

Time series data base of RBI Central statistical organization

TOOLS FOR ANALYSIS

The contribution of different factor inputs to agricultural production during pre and post liberalization period was identified with the help of production function. For this purpose we used regression analysis in SPSS. The model used is

Pr=β1+βA+βP+β3FWhere, Pr= Agricultural Production, β1=

Constant, A= Area, P= Pesticides, F= Fertilizer,

LIMITATION

Only secondary data is used. The sample size is small. There is serial correlation among

independent variables.

ANALYSIS AND INTERPRETATION

Full period (1950-2011)

Area,fertilizer,pesticides shows positively significant effect on agricultural production in full period , which means one unit change in these independent variables explains an increase of 7%,84%,21% respectively in agricultural production .

The R square value of this model is 0.927 ,which means that about 92% of the variation in agricultural output is explained by area , fertilizer and pesticides .

There is a positive serial correlation among variables due to uniqueness in factors .

The major predictors are;Area (0.07) Fertilizers (0.84) Pesticides (0.21)

Regression equationY = a + βx1+βx2+….+ βxn

Agri output= (182.7)+ (0.07) Area+(0.84) fertilizer +(0.21)pesticides

PRE REFORMS(1971-1991)

Area and fertilizer are having positively significant effect on agriculture production in pre-liberalization period .

one unit change in area and fertilizer explain an increase of 23% and 74% respectively in agricultural production.

R square is showing .867, which means 87% of variation in agri-output is explained by area and fertilizer.

Pesticides shows positive but insignificant relationship ,its due to lack of availability of innovative perticides.

There is a positive serial correlation among variables due to its uniformity.

The major predictors are;Area (0.235) Fertilizers (0.742)

Regression equationY = a + βx1+βx2+….+ βxn

Agri output= (701.9)+ (0.235) Area+(0.742) fertilizer

POST REFORMS(1991-2011)

Fertilizer is having positively significant effect on agricultural production in post reforms era .

It means one unit change in fertilizer explain an increase of 60% in agricultural output.

Perticides is having negative significant effect on agricultural production , it means one unit change in perticides explain a 42 % decrease in output.

Area is positively insignificant , because after liberalization there was a decline of .80% (p.a)in land use for agricultural purpose , which was .20%(p.a) in pre era as per statistics.

The major predictors are; Fertilizers (0.605) Pesticides (-0.423)

Regression equationY = a + βx1+βx2+….+ βxn

Agricultural output= (483.8)+(0.605) fertilizer +(-0.423)pesticides

A GlanceVARIABLES BETA SIGNIFICANCE VIF

ADJ R SQUARE

PRE-REFORMS

AREA 0.235 0.003 1.675

0.867FERTILIZERS 0.742 0.000 5.721

PESTICIDES 0.034 0.786 0.217

POST-REFORMS

AREA 0.061 0.360 1.277

0.948FERTILIZERS 0.605 0.000 2.549

PESTICIDES -0.423 0.000 2.172

In pre-liberalization era area and fertilizers are the major factors of production that contributed to total production. The use of pesticides was very less in this period so that it is insignificant to output

in post liberalization period area shows insignificant to total production since there is a decline in total use of land (aproximately .80% per annum)

Unlike in pre liberalization pesticides are significant to total output in post reform due to import of advanced pesticides from other nations.

NAP (NATIONAL AGRICULTURAL POLICY-2000)

The policy developed various measures for boosting up agricultural sectors including target towards increasing agricultural exports and decreasing imports.

This study analyses the impact of NAP in export and import of agricultural products.

Agriculture Total National %age Agriculture Agriculture Total National %age Agriculture Imports Imports Imports to Total Exports Exports Exports to Total

National Imports National Exports1 2 3 4 5 6 71990-91 1205.86 43170.82 2.79 6012.76 32527.28 18.491991-92 1478.27 47850.84 3.09 7838.04 44041.81 17.801992-93 2876.25 63374.52 4.54 9040.30 53688.26 16.841993-94 2327.33 73101.01 3.18 12586.55 69748.85 18.051994-95 5937.21 89970.70 6.60 13222.76 82673.40 15.991995-96 5890.10 122678.14 4.80 20397.74 106353.35 19.181996-97 6612.60 138919.88 4.76 24161.29 118817.32 20.331997-98 8784.19 154176.29 5.70 24832.45 130100.64 19.091998-99 14566.48 178331.69 8.17 25510.64 139751.77 18.251999-00 16066.73 215528.53 7.45 25313.66 159095.20 15.912000-01 (NAP) 12086.23 228306.64 5.29 28657.37 201356.45 14.232001-02 16256.61 245199.72 6.63 29728.61 209017.97 14.222002-03 17608.83 297205.87 5.92 34653.94 255137.28 13.582003-04 21972.68 359107.66 6.12 37266.52 293366.75 12.702004-05 22811.84 501064.54 4.55 41602.65 375339.53 11.082005-06 21499.22 660408.90 3.26 49216.96 456417.86 10.782006-07 29637.86 840506.31 3.53 62411.42 571779.28 10.922007-08 29906.24 1012311.70 2.95 79039.72 655863.52 12.052008-09 37183.03 1374435.55 2.71 85951.67 840755.06 10.222009-10 59367.62 1356468.65 4.38 89522.59 845125.21 10.59

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

(NAP)

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

0.00

5.00

10.00

15.00

20.00

25.00

30.00 %exp to total exp

%of imp to total imp

In pre-NAP era there was an average of 18% of agricultural exports to total exports but on the contrary to the expectation of NAP. There shown an average of around 11% only in post NAP era.

Fortunately NAP could bring down the imports of agricultural products at an average of 5% from pre-NAP period to 4% in post-NAP period

The agricultural imports have very volatile than the total imports while agricultural exports are less volatile than the total exports.

FINDINGS

During the full period 1950-2011all factors of production (Area, fertilizer, pesticides) contributing to agricultural production.

Before liberalization(1971-1991) Area and fertilizer are having effect on agriculture production. Pesticides were low quality and weak in the pre-reform era.

After liberalization (1991-2011) ,use of fertilizer helps in increasing output whereas use of Pesticides decreasing agricultural production.

During post-NAP era there shown a drastic decline in agricultural exports

There is noted a decline in total production and use of land in post liberalization

SUGGESTION

Government concentrate more on implementation of policies.

Take proper measures to protect agricultural area.

Provide more incentives and supports to increase export and reduce import.

CONCLUSIONThe previous study in this area have shown

Technical Efficiency in production function and advantages of export major agricultural commodities.

This study channelizes towards finding out the important factors of production which will fetch higher agricultural output. And we concluded that fertilizer and area contributing much to increase output. But area is not contributing at present. Hence the policy makers should stick on to the production factors on large to cope up with food crisis.

Agricultural policies are not significantly resulting up to what was expected by policy makers.

THANK YOU…