Price Incentives, Nonprice factors, and Crop Supply Response:The Indian Cash Crops

Agriculture as a source of growth was sorely neglected in the early development strategies of the currently developing countries. Realisation of this shortcoming prompted public policy in these countries to encourage agriculture by various means. The success of these policies depends, however, on how farmers respond to the incentives provided. Using panel data pertaining to Indian agriculture for the period 1967-68/1999-00, covering 7 major 'annual' cash crops cultivated across 16 major states, we provide estimates of area, yield and output elasticities w.r.t price and nonprice variables. Our results suggest that the preferred policy ought to be to enhance irrigation and encourage the use of fertiliser and HYVs, if long-run agricultural growth is to be achieved.