Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab

This paper examines the rationale, practice, and problems of contract farming in vegetable crops in the agriculturally developed Indian Punjab which has faced the problem of sustainability of growth since the early 1980s. It is found that agribusiness firms deal with relatively large producers and their contracts, which are biased against the farmer, perpetuate the existing problems of the farm sector such as high chemical input intensity, and social differentiation. Contracting has however, led to higher farm incomes and more employment for labor. There seems to be an inherent contradiction in the objectives of the contracting parties and those of the local economy.