Credit Subsidy Policy and the Moral Hazard of Loan Waivers in the Non-Traded Agriculture Sector in Presence of Credit Market Dualism: A Three- Sector General Equilibrium Model

Abstract

The paper is an attempt to unveil the growth-development tradeoff in the Indian agriculture sector in light of some selected recent policy measures in presence of dualism in both agriculture sector and credit market. Segmentation of the agriculture sector is addressed as traded export agriculture and non-traded agriculture sector. The dualism in the credit market is the coexistence of the formal and informal credit market. In this paper, we construct a three-sector general equilibrium model which may apply to a large class of emerging market economies. The results of the paper reflect contradictions of an emerging economy which is essentially hybrid economics in which capitalist nucleus has a conditional-conditioning relationship with an archaic structure.JEL Classification: Q14, D58