A CGE model for India with an application on the effects of eliminating agricultural subsidies

Peter Dixon, Maureen Rimmer, Rajesh Chadha, Devender Pratap and Anjali Tandon

No 332661, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: There are growing concerns about inefficiencies in Indian agriculture arising mainly due to agricultural subsidies on production and consumption. The subsidy regime results in lowering of productivity, crowding out of public investment and increasing environmental concerns. The aim of this paper is to produce a quantitative analysis of the economy-wide effects in India of the elimination of agricultural subsidies. We show the effects on industry and macro variables and also trace out the effects on greenhouse-gas emissions from Indian agriculture. The analysis in this paper is based on a dynamic computable general equilibrium (CGE) model in the Centre of Policy Studies (CoPS) modelling tradition. The paper describes the following tasks: (a) Creation with 2007-08 data of a 130 sector dynamic CGE model of India in GEMPACK code. The input-output transactions table 2007-08 for 130 sectors has been sourced from the Central Statistical Office of the Government of India. (b) Update from 2007-08 to 2012-13. The update was done by historical simulation. In this simulation, shocks are applied to a range of observable variables to move them from their 2007-8 values to their 2012-13 values. The model then estimates 2012-13 values for other (unobserved) variables that are consistent with the shocked variables. For example, if we impose the 2012-13 value for overall consumption of food products, the model estimates values for consumption of food products at the more disaggregated level required for the 130 sector model. The result of the historical simulation is to produce a 2012-13 database for the model which is not contradictable by readily available statistics. (c) Revision of the specification of agriculture in the CGE model. The main requirement is disaggregation. This process involves the splitting of Wheat into Wheat North and Wheat Other. The split is important for subsidy analysis because the subsidy rates applying to wheat production in...

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2015
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