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Estimation of technical efficiency of Indian farms for major crops during 2013–2014 and 2017–2018: a stochastic Frontier production approach

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Abstract

Indian agricultural landscapes can provide solid empirical evidences on the immensity of farmer efficiency levels in comparable countries with a preponderance of small and marginal farmers. This article analyses the technological efficiency of India's major crop producers. To estimate the production frontier function and technical inefficiency values for the 12 major crops that cover more than 70% of the area under cultivation, a stochastic production frontier (SPF) with a flexible model is applied to plot level data. This study uses cross-sectional plot level data for the years 2013–2014, a normal monsoon year and 2017–2018, a deficit year. The error terms are assumed to represent a combination of technological inefficiencies and random noises that would otherwise obscure the technological inefficiencies and result in erroneous conclusions. The results demonstrate empirically that inefficiency levels exist across crops. Wheat has the lowest mean technical inefficiency (15%), followed by paddy and sugarcane (both 24%) (year 2017–2018). There is enormous potential for farmers to increase their efficiency by 30–40% in crops such as pulses, oilseeds, and cash crops. Furthermore, results indicate that educational attainment, soil quality, and seed variety can contribute significantly to farmers' technical efficiency.

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Fig. 1

Source: Author’s calculations based of cost of cultivation datasets for the year 2013–2014 and 2017–2018

Fig. 2

Source: Author’s calculations based of cost of cultivation datasets for the year 2013–2014 and 2017–2018

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Data availability

Details on data analysed in the current study can be obtained from the corresponding author on reasonable request.

Notes

  1. Total labor includes family labor, attached labor, and casual labor.

  2. It may also be noted that correlation matrix of all the independent variables with dependent variable shows very weak correlation, and hence, production function may not be suffering from major endogeneity problem. For further analysis, the reader can refer to Gautam and Ahmed (2019).

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Acknowledgements

The authors acknowledge Directorate of Economics & Statistics, Ministry of Agriculture, Government of India, for providing the data.

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  1. Department of Biotechnology (DBT), Ministry of Science and Technology, Government of India, CGO Complex, New Delhi, 110003, India

    Radha R. Ashrit

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R.R.A. was involved in designing, conceptualization of the study, data analysis, and writing and reviewing the manuscript.

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Ashrit, R.R. Estimation of technical efficiency of Indian farms for major crops during 2013–2014 and 2017–2018: a stochastic Frontier production approach. SN Bus Econ 3, 54 (2023). https://doi.org/10.1007/s43546-023-00433-4

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