Impact of Liberalization Process on Growth, Instability, Extent of Diversification and Total Factor Productivity Growth of the Agricultural Sector

Abstract

India is perusing different policies of liberalization for different sectors of the economy including agricultural sector since 1991. Further, in 1993, the Uruguay round of the General Agreement on Tariff and Trade (GATT) extended global free trade to agricultural sector. The World Trade Organization (WTO) replaced GATT and started functioning on 1st January 1995, as an international organization, but the General Agreement remained under WTO umbrella.

It is well understood that trade liberalization provides many benefits such as increase in market size, knowledge of demand characteristics in foreign markets, information about new technologies, process and products and cost reduction and quality improvements. Also, the gains from trade can arise because of (a) movement of existing production possibility frontier (due to technical efficiency) (b) movement along the existing possibility frontier because of new trading opportunities and (c) upward shift of frontiers due to learning, application of improved technologies. The upward shift of the frontiers measures the magnitude of total factor productivity growth. We are interested in estimating the growth of production of food grains production, for 17 major States of India for the period 1971-72 to 2010-11.