DOI: 10.36347/sjebm.2023.v10i05.003

Pages: 118-129

Using Johansen cointegration test, the study analyzes the long-term relationship between the agricultural GDP and its factors (agricultural land, irrigation, fertilizer use, and absolute residual of rainfall and temperature) in India during the period 1960-61 to 2019-20. The analysis considers the absolute residual values of rainfall and temperature as relevant factors. Overall, agricultural production demonstrates a long-term correlation with rainfall and temperature trends due to its capacity to adapt to these variables over extended periods. The findings indicate a significant long-run relationship between these variables, with at least two cointegrating equations. The normalized cointegrating coefficients reveal a positive relationship between agricultural productivity and the size of agricultural land, irrigation, and fertilizer use, while the absolute residual of rainfall and temperature have a negative impact. The adjustment coefficients show that the speed of adjustment to the long-run equilibrium is relatively slow, with the short-term dynamics driven by changes in the residuals. Additionally, the results suggest that policies aimed at increasing agricultural land, irrigation, and fertilizer use in India could positively impact agricultural productivity in the long run. Nevertheless, policymakers should be cautious about the potential adverse effects of policies that impact the residuals, and the implementation of such policies should be done with prudence and patience. These results can provide valuable insights for policymakers and stakeholders in the agricultural sector in India.