Technical and Scale Efficiency of the Paddy Cultivation in India

Abstract

Agriculture is the Key sector in the economy of any nation. Its contribution towards employment, food security and Gross Domestic Product needs emphasis on its production and consumption. In this light, this paper analyses the technical efficiency of paddy production among Indian states using Data Envelopment Analysis technique. The output variable used in this paper is the produced quantity of paddy. Input variables are related to Land used, Fertilizers consumed and area treated with pesticides. This analysis from an input orientation observes that 25% of the states are technically efficient under Constant Returns to Scale assumption and 55% states are technically efficient under Variable Returns to Scale assumption. 25% states are scale efficient. 35% of states operate under Decreasing Returns to Scale and 40% under Increasing Returns to scale. The average scale efficiency of the 15 inefficient firms is found to be 83% suggesting a 17% reduction of the resources used by them to keep output levels constant. Besides, this paper also summarises the results from both input-oriented technical efficiency and output-oriented technical efficiency measures. Furthermore, these measures are reported for the production characterized by Constant Returns to Scale and Variable Returns to Scale. Madhya Pradesh, Gujarat, Telangana, Andhra Pradesh, Telangana and Tamil Nadu form the technically inefficient group either from an input-oriented or from output-oriented measures of technical efficiency. Both the orientations are useful from the policy perspectives of food security, environmental conservation and reduced burden on the public exchequer.