ABSTRACT
This chapter focuses on the role of input use efficiency in influencing agricultural output both at the national and state level in response to changes in policies at the national level. The regional or state-level differences are captured in the frontier production function model for crop production. The chapter shows that depreciation of the rupee is likely to benefit agriculture relative to manufacturing as crop exports respond to the rise in export price and non-food grain prices respond relatively more than the food grain prices. The government operations in the food grain sector to provide support prices to the farmers and subsidized food grains to selected consumer groups are affected by specific policy choices relating to agriculture. In the context of reducing fiscal deficit to provide greater macroeconomic stability, reduction in government expenditure is a major option. The chapter examines the extent of supply response if agricultural prices increase as a result of trade liberalization in agriculture.
