Agrarian Crisis in Andhra Pradesh

The reform package for agriculture emphasises on making terms of trade favourable, and assumes that these can take care of capital formation, technical change, and output in the agriculture sector. The results of this study show that the terms of trade have become favourable to the sector in the reform period. However, the favourable impact of the terms of trade has been eroded by the absolute decline in total factor productivity. This decline in total factor productivity is the crux of agrarian distress. The favourable terms of trade have not led to higher capital formation, or statistically significant supply response, and/or higher agricultural output growth. As the present level of infrastructure is working as a hindrance to having the desired impact from the favourable prices, the strategy of agricultural development must mainly focus on improving rural infrastructure through increased role of state.