Total Factor Productivity and Cost Dynamics of Paddy Cultivation in Tamil Nadu

Paddy Farming Productivity Trends and Cost Dynamics

Abstract

Productivity growth is of central importance to economic growth. The Study examined the growth trends, instability, cost structure and Total Factor Productivity (TFP) growth of paddy cultivation in Tamil Nadu using 25 years of time-series data from 1997–98 to 2021–22. The growth in paddy crops revealed distinct trends, the area under cultivation showed a slight decline (-0.69 per cent) due to factors such as water scarcity, urbanization, and crop diversification. Production remained stagnant (0.004 per cent) with high annual variability (25.4 per cent), largely influenced by rainfall variation and input fluctuation. In contrast, yield showed moderate improvement (0.29 per cent) suggesting better technology adoption and resource management by farmers. Total Factor Productivity of Divisia –Tornqvist theil index showed a modest but steady increase in productivity, with a growth rate of 35 percent and an average TFPI of 122.4. indicating a 22.4 per cent rise in productivity relative to the base year. The significant decline in Total factor productivity index were observed in years like 2002–03 (66.82) and 2015–16 (109.64), likely due to droughts or input supply disruptions, while years like 2001–02 and 2003–04 showed sharp gain due to higher output with stable input use. On average the Total Output Index (TOI -121.6) has grown more rapidly than the Total Input Index (TII -100.4), indicating the positive TFPI trend. Minimum Support Price (MSP) generally exceeded the Cost of Production (CoP), supporting farmer incomes, except during 2016–18 due to rising input costs. Post-2018, MSP grew faster than CoP, reflecting stronger government price support.