Impact of Farm Machinery Rental Services on Productivity, Market Participation and Net Farm Income: Evidence from Paddy Farmers in Punjab, India

Abstract

Agriculture is vital to India’s economy and livelihoods but faces labour shortages, rising food demand, and climate challenges. Mechanisation has improved productivity, yet India still needs faster technological advancement to ensure future food security. This study estimates the effects of rental services of agricultural machinery on productivity, market participation, and farm income, utilising primary data collected from 320 non-basmati paddy growers in Punjab, India. This study captures mechanisation service adoption as a dichotomous decision and adoption intensity as a latent variable and employs a conditional mixed process (CMP) model to address selection bias issues. The results show that adopting mechanisation services significantly increases productivity, market participation, and farm income, and the larger impact is associated with the higher adoption intensity of mechanisation services. Our results also reveal that mechanisation service adoption is significantly determined by dependency ratio, farm size, and education level of the household head. It was also found that young farmers and large landholders were more likely to intensify the adoption of mechanisation services. Our findings highlight the importance of agricultural mechanisation services in improving productivity and market participation, which eventually increases farm income.