Abstract
Employing a dynamic nine-sector, seven-income classes computable general equilibrium (CGE) model for the Indian economy (1985–90). this paper analyses the medium-run effects of (agricultural) trade liberalization. Its focus is on the effects of trade reform on farmers' incentives, because it is often presumed that the lack of adequate incentives constitutes the major constraint on private agricultural investment and the use of modem inputs. The simulation results suggest that, given empirically plausible price response elasticities, the improvement in farmers' incentives consequent upon trade liberalization is unlikely to increase agricultural productivity and real incomes in a broad-based and sustained manner. It is with reference to these results that major technological, social and structural, and organizational barriers to private agricultural investment are discussed and an important role is identified for government intervention in fostering agricultural development.
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