Aggregate Agricultural Supply Function in India

This paper attempts to examine whether the aggregate agricultural supply function in India is price elastic. An acreage response function for the period 1950-51 to 1996-97 corroborates the results of earlier scholars, which is that India's aggregate supply function is not price responsive. However, periodising the framework of analysis, due to changed growth rates and policies after 1980-81 suggests a weak relationship between acreage response and terms of trade for the latter period. For this period, acreage response to prices in the market determined non-foodgrains sector, on the other hand, is highly significant. It is still incorrect to say that Indian agriculture responds at the aggregate level to price stimuli but ignoring the marketisation of substantial sections of the economy is also not useful. The agrarian economy reflects the transitional nature of the policy regime since 1980 and this paper offers some tools to understand it.