A Historical Cum Empirical Overview of Agriculture Spending and Output Nexus in India

Abstract

This research aims to have a holistic view of the relationship between agriculture outcome/output and agricultural spending in India. The unique part of the study is that it highlighted the nexus between agriculture outputs from a historical point of view. The empirical part of this study is analyzed using the development of the co-integration method followed by the VECM model. The empirical analysis shows -a long-run association between agriculture spending and production, and this feedback is bidirectional. Agricultural production positively responds to agricultural spending in India both in the short and long run, especially in sowing seasons. However, the exciting finding of the study is that the speed of adjustment of agricultural spending on output is plodding. This implies that any shock of the agricultural production can be corrected by agricultural spending by just 20 percent, and it will take more than four years to stabilize the agricultural output with agricultural expenditure. Thus the tendency of agrarian spending to stabilize agrarian output in India is not so encouraging.