Indian agricultural policy: An applied general equilibrium model

A ten-sector, sequential applied general equilibrium model is formulated, estimated, and stimulated for analyzing agricultural policy choices for India until year 2000. Ten groups of consumers (five of them rural), each with its own preferences and claims on output are recognized in the model, the groups distinguished by the range of their per capita household (real) consumption expenditure. The simulations compare: four policies with respect to the compulsory purchase and subsidized distribution to consumers of a limited amount of foodgrains and four foreign trade and aid scenarios. Procuring and freely distributing 100 kgs of grain per capita per year and financing the cost through additional taxation improves income distribution with no reduction in growth. On the other hand, the same distributional policy financed by reducing investment has a negative impact on growth.