Modeling the Impact of Agricultural Growth and Government Policy on Income Distribution in India

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Abstract
This article uses a limited general equilibrium model to investigate the growth and equity effects of a variety of economic and technical changes and selected agricultural policies in India. It explores how changes in food prices, rural wages, and farm profits associated with the Green Revolution period affected income distribution between net buyers and sellers of food. The model shows that income gains from the Green Revolution initially accrued to the wealthier rural groups but that after 1972–73 they were transferred to urban consumers and that by 1980–81 the per capita incomes of poor and wealthier rural groups alike were barely above their respective 1960–61 levels. The model is also used in counterfactual analysis of the impact of changes in technological, demographic, investment, taxation, and income redistribution variables. Its findings indicate the importance of trade policies for the nature of the equity outcomes from agricultural growth and suggest that a reduction in population growth and an increase in nonagricultural employment and income are required to convert agricultural growth into reduced rural poverty.

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