Estimation of price elasticity of fertilizer demand in India

Abstract

The empirical evidence on the price elasticity of fertilizer demand in India is not conclusive. In order to properly estimate the likely impact of the policy changes affecting fertilizer prices on the fertilizer use and hence on the agricultural growth in the country, magnitude of the short-run and long-run price elasticity of fertilizer demand is essential. The present study attempts to estimate the elasticity coefficients by appropriately specifying the fertilizer demand function. Both static as well as dynamic models are considered. The fertilizer demand in India is found to be price inelastic in the short-run and even in the long-run. Our estimates based on a time series macro level data from 1966-67 to 1991-92 are corroborated by the findings of a recent survey carried out in U.P.