Centre for Development Economics
Department of Economics

Delhi School of Economics


To Reform and to Procure: An Analysis of the Role of the State and the Market in Indian Agriculture


Kartik Misra
(Sewanee: The University of the South)
Authors: Deepankar Basu (University of Massachusetts Amherst)

Kartik Misra (Sewanee: The University of the South)

May 19, 2022, Thursday at 3:05 PM IST (online)


The glorious year-long struggle by Indian farmers in 2021 brought the issue of agrarian distress to the forefront of policy and political discussions in India. Using unit-level data from various rounds of the Employment and Unemployment Survey of the National Sample Survey Organization, we present the first consistent time series of average real farm income per cultivator for 18 major Indian states for 1987-88, 1993-94, 1999-00, 2004-05, 2007-08, 2009-10, and 2011-12. Using this data, we study two sets of issues. First, how did real farm income evolve across these 18 Indian states? Which states have high levels and growth rates of real farm incomes? Is there any evidence for convergence of real farm incomes across Indian states? We find evidence for unconditional convergence, which suggests that states with relatively lower farm incomes have, on average, grown at relatively faster rates. But the tendency towards convergence has not been strong enough to change relative rankings of states (by real farm income per cultivator) in any significant way.

Second, did the market-oriented reforms of agricultural marketing systems increase real farm incomes? Since the early 2000s, many Indian states started reforming their agricultural marketing policies and allowed private traders to buy directly from farmers outside the state-regulated market system. The experience of these states during the period 2000 – 2012 can shed light on the impact of market-oriented reforms and the role of public procurement. Augmenting our new dataset on state-level average real farm income with individual-level National Sample Survey Data on agricultural wages we test whether these reforms had an impact on farm incomes and agricultural wages using both a difference-in-difference and a triple difference framework. We find that marketing reforms alone, did not contribute to higher farm incomes and agricultural wages. However, when these reforms were coupled with public procurement at the minimum support price, farm incomes and agricultural wages significantly improved. The effects of public procurement were driven primarily by rice procurement. Our results suggest that market-reforms and public procurement at minimum support prices were complements which together contributed to raising rural incomes in states like Haryana, Madhya Pradesh, and Andhra Pradesh.

Note: The zoom link will be shared soon. 

All are cordially invited.

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