Does Vertical Integration Benefit Cotton Farmers? Encouraging Evidence from an Experiment in Andhra Pradesh

R V Ramana Murthy

The IUP Journal of Agricultural Economics, 2011, vol. VIII, issue 4, 41-57

Abstract: Cotton production in India needs to be reorganized in order to increase productivity, reduce cost of production, and secure stable returns to the farmers. Cotton is produced in India under varied conditions and entails certain heterogeneity in terms of yield, cost and return. The common cause of concern is how to reduce the ever rising costs of production and increase value addition to the farmer. Industry needs extra long staple and clean cotton for value-added production. In the presence of anonymous agents working through spot markets, production decisions suffer from inefficiencies owing to information asymmetry and bounded rationality. There is a need for an informed coordinating agent between farmer and other input providers on the one side, and to supply managerial technology and link up final buyer, on the other. Such vertical integration strategies are capable of avoiding the intermediate channels of middlemen, raising direct benefits by enhancing yield and quality and producing internal economies. This paper sets out to analyze the e-safal experiment in six villages of Andhra Pradesh in the light of such context of vertical integration.

Date: 2011
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