Technical Efficiency of Chemical Fertilizers Use and Agricultural Yield: Evidence from India

Abstract

The agriculture sector is a significant contributor to food security and employment in India, where sustainable yield in agriculture is a prime concern. The heavy and improper use of chemical fertilizers persists in technically inefficient agricultural production. This study attempts to evaluate the technical inefficiency of chemical fertilizers' use and measure the potential minimization of fertilizer input without compromising the agricultural yield level. The study uses secondary data from 2006 to 2015 of 28 Indian states and empirically analyses the efficiency of chemical fertilizers use and their impact on agricultural yield by incorporating slack-based Data Envelopment Analysis (DEA). Three chemical fertilizers, namely; Nitrogen (N), Phosphorus (P), Potassium (K), and gross irrigated land area, have been taken as input variables, and States Total Food-grain (STFG) has been taken as the output variable. The conventional slack-based DEA procedure may have bias efficiency estimates, therefore in the second step Double Bootstrap DEA procedure is followed to correct the biasness of efficiency scores which further checks the moderating relation between efficiency scores and agricultural credit using #algorithm1 and #algorithm2 of Simar and Wilson (2007). Findings indicate that fertilizer K has a higher possibility to decrease, followed by P and N. Evidence from double bootstrap establishes a positive relationship between agricultural credit and yield. Hence, farm-level policies, budgetary implications of agricultural credit, and awareness about the proper use of fertilizers will help reduce chemical fertilizer intensiveness in the production and enhance the farmers’ income through input saving strategy.