Recent Trends in Inter-Sectoral Terms of Trade

Revisiting an old debate about terms of trade of agriculture vis-à-vis other sectors in the Indian economy, it is argued that the ToT of agriculture has remained favourable for a large part of the post-liberalisation phase, with it being most favourable since the mid-2000s. This is despite rising costs of production, high rural inflation, and rising human labour costs. It is further argued that large farmers seem to have benefited the most from the favourable ToT, which helps understand the narrowing inequality between rural and urban India, along with rising inequality within rural India.