Slow Structural Change in India: Is It Related to Rising Relative Price of Agriculture? A Partial Equilibrium Model

Abstract

Economic growth across countries is associated with changes in the composition of sectoral output, employment and consumption structure, known as “structural change”. With high growth rates in the Indian economy in the post liberalization period, structural change is expected to be rapid. However, the share of the manufacturing sector has “crossed” over that of the agriculture only very recently from the supply side and yet to cross over from the demand side. Through a simple partial equilibrium model, this paper shows that such slow structural change may be linked to a secular rise in the relative price of agricultural goods in India.