Total Factor Productivity Growth in Agricultural Sector of Nepal: Trends and Determinants

Agricultural productivity growth in Nepal has been dismal and fluctuating over last 30 years period which is considered a main sector for economic growth, poverty reduction and food security. This paper aims at analyzing the production growth of different sub-sectors of agriculture, estimating the  Agricultural Total Factor Productivity (ATFP) and identify its determinants .During the period under study, the production growth in most of the crops and commodities came mostly from area expansion rather than yield growth. The agricultural TFP growth remained at about 1 percent per annum for the period between 1984-2014 while it was negative (-0.15 percent) in the first half. In sum, the ATFP growth contributed about one-third to total AGDP growth. The analysis of the determinants of ATFP showed that the variables such as public resources allocation to agricultural sector, ratio of irrigated to cultivated area, road density positive and significant variables while literacy among economically active population in  agricultural sector  was significant and negative variable to ATFP growth. The ATFP growth was higher for Agriculture Perspective Plan (APP) period compared to pre-APP period.

The results of imply for increasing investments in agricultural sector for technology development and their dissemination and developing rural infrastructures such as  irrigation and rural roads in order to increase the total factor productivity of agriculture. Similarly, the educated youths can be retained in agricultural sector of rural areas by providing a package of technology, skills and finance to carry out the agricultural enterprises.

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