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Simultaneous equation model for Indian sugar sector

Umanath Malaiarasan, R. Paramasivam (), K. Thomas Felix () and S. J. Balaji ()
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R. Paramasivam: Kumaraguru Institute of Agriculture
K. Thomas Felix: Madras Institute of Development Studies
S. J. Balaji: National Institute of Agricultural Economics and Policy Research

Journal of Social and Economic Development, 2020, vol. 22, issue 1, No 6, 113-141

Abstract: Abstract India is the second-largest producer and consumer of sugar and sugarcane-based products. Changes in sugar production in India affect domestic and global markets of sugar and related industries. In this paper, a simultaneous equation model is developed to understand the interrelationship between sugar supply and demand in India using time-series data over 44 years from 1970–1971 to 2013–2014. Three-stage least square regression model was used to estimate the elasticities of supply and demand equations of sugar. Results revealed that price of sugar affected sugar supply positively and demand negatively. Recovery rate and amount of cane crushed have positive relationship with sugar production. Changes in current year area harvested, yield and FRP determine the future area under sugarcane cultivation. Rainfall and technology have supported to increase the yield. Sugar consumption has direct relationship with population rate. These results suggest that technological development, external trade and appropriate sugar policy measures are the primary choice to resolve the sugar complexities in future.

Keywords: Sugar; Price; Technology; 3SLS; Simultaneous equations; Agro-processing (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40847-020-00095-0

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Handle: RePEc:spr:jsecdv:v:22:y:2020:i:1:d:10.1007_s40847-020-00095-0