Abstract

The study endeavors to evaluate the efficiency performance of Indian Agriculture over the period of 1971 to 2004 using the technique of Data Envelopment Analysis. The empirical results reveal that the agriculture sector in India is operating with technical inefficiency to the tune of 18% which is high by all standards. Further, it has been observed that the technical inefficiency is mainly caused by improper selection of production scale, thus calls for an urgent need of cooperative farming to reap the potential of economies of scale in agriculture sector. The application of panel data Tobit regression analysis aiming to examine the impact of various explanatory variables on efficiency measures reveal that mechanization of agriculture, development of irrigation and an increased supply of electricity have positive effect on all the three measure of efficiency. However, the policy of frequent increase in supply of credit to agriculture sector fails to bring any improvement in agricultural efficiency of India as the effect of this policy variable is negative on all the three measure of efficiency.

Key words: Technical efficiency, Indian Agriculture, data envelopment analysis, Tobit regression.