Decomposition of climate-induced productivity growth in Indian agriculture

Abstract

This paper adopts a stochastic frontier approach to investigate the trend and determinants of total factor productivity (TFP) growth in the agriculture sector of India, using extensive district-level data. The assessment of the production frontier highlights the efficiency aspect of Indian agriculture and contributes to an analysis of those factors that might be directly engaged in the production process. After controlling for the district-specific climatic effect in the production of eighteen major crops, TFP growth is deconstructed into technical progress, technical efficiency change and scale effects. Four weather parameters, average temperature, rainfall, evapotranspiration and windspeed, are defined as exogenous determinants of the technical inefficiency term to analyze the influence of changing climate. Based on the true fixed effect model and maximum likelihood method, the estimated TFP growth averaged 0.688% per year between 1990 and 2015. The relative performance of Indian states apparently differs according to estimated productivity scores. The findings show that changes in technical efficiency account for most TFP growth, whereas differences in scale components account for annual and cross-state productivity growth disparities. The study suggests that region-specific policies are required to enhance agricultural productivity and add to the understanding of the arguments over TFP growth in Indian agriculture.