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Research Paper | Economics | India | Volume 14 Issue 3, March 2025 | Popularity: 5.6 / 10
Tilling the Soil, Fueling the Factory: Exploring the Agriculture-Industry Nexus in India Before and After Liberalization
Smita Nath
Abstract: The present paper reconsiders the issue of nexus between agriculture and industry in India, and, in its states and Union Territories. The country-level study covers the period from 1950-51 to 2022-23. Further, the study is done separately for the periods before and after liberalization. For the state-level analysis the period from 1993-94 to 2022-23 is considered. We also examine whether such relationship has any impact on the average rate of economic growth of states measured by the annual growth rate of net state domestic product during the study period. The results of the cointegration tests and the relevant error correction models and vector autoregressive models indicate that during the period 1950-51 - 2022-23 the gross value added by agriculture and that by industry for India were significantly and positively related in the long-run. However, the nature of relationship was found to change in the post-liberalization period. A positive long-run relationship was noted before liberalization; but after liberalization, the relationship was significant in the short-run only, where GVA by industry was expected to have positive influence on GVA by agriculture. The state-level analysis indicated a significant positive relationship in the long-run in 14 out of 33 states. Out of the nine states where short-run relationship was significant, in six of them the industrial state value added Granger-caused the agricultural state value added. Moreover, during the study period, the average rate of economic growth of the states was not found to be affected by the existence or non-existence of the agriculture-industry relationship.
Keywords: Agriculture-industry relationship, States of India, Sectoral linkages
Edition: Volume 14 Issue 3, March 2025
Pages: 1437 - 1447
DOI: https://www.doi.org/10.21275/SR25323183238
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