Price and Non-Price Factors in Agricultural Investments

Price and Non-Price Factors in Agricultural Investments V N Misra Peter B R Hazell THE critical observations by B D Dhawan (1996; BD hereafter) on our paper (Misra and Hazell 1996] are primarily concerned about estimated private investment equation. He thinks that we give too much emphasis to the price factor and not enough to the role of public investments while interpreting the results. Indeed, he accuses us of being excessively zealous in underscoring the role of prices. His comments seem misplaced when viewed within the broader context of our paper. We attempted to analyse the role of price and non-price factors in determining the complex interrelationships among agricultural output, investment and rural poverty. Our general finding is that non- price factors, especially investments in irrigation and improved technology are crucial for agricultural growth and alleviation of rural poverty. The fact that we also find that the private component of these investments responds positively to more favourable prices hardly leads us to conclude that the public component of these investments is not also vital. What follows is a brief discussion on the important points raised by BD on our paper.