Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Do Macroeconomic Conditions Matter for Agriculture? The Indian Experience – isec

Do Macroeconomic Conditions Matter for Agriculture? The Indian Experience

Abstract

Macroeconomic instability, characterised by high inflation, a fragile foreign exchange position, high rates of interest, increases uncertainty for any investor or producer and hence slows down economic growth. While this is generally accepted, the usual perception about the agricultural sector, particularly in India, is that it is immune to general macroeconomic shocks. In this paper, we intend to examine this perception formally using a vector auto regressive model. By studying the significance of macroeconomic conditions to the agricultural sector, we observe that the sector is not insulated from macroeconomic shocks.

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