Agricultural Value Addition and Structural Transformation in a Developing Agrarian Economy: Evidence from Bihar, India

Abstract

Agricultural value addition and structural transformation are central to sustainable rural development in developing agrarian economies. Although Bihar remains predominantly dependent on agriculture, existing studies have focused mainly on production growth, technological change, or public investment, with limited attention to the interrelationships among Agricultural Gross Value Added (AGVA), structural transformation, and the production-side sources of agricultural growth. This study addresses this gap by examining the evolution of agricultural value addition and structural transformation in Bihar during 2000–2024. The analysis integrates structural composition analysis, production-decomposition techniques, and Ordinary Least Squares (OLS) regression using time-series data obtained from the Ministry of Statistics and Programme Implementation (MoSPI), Government of India, and the Directorate of Economics and Statistics, Government of Bihar. The findings reveal that agriculture's share in Gross State Value Added declined substantially during the study period, while a large proportion of the workforce continued to depend on agriculture, indicating persistent structural imbalance. Crop production remained the principal contributor to AGVA, although the contributions of livestock, fisheries, and horticulture increased gradually, reflecting emerging diversification. Production-decomposition analysis shows that yield improvement consistently replaced cultivated area expansion as the principal driver of agricultural growth, while econometric results confirm that crop production remains the strongest determinant of AGVA, with fruit production making a significant positive contribution to agricultural value creation. The findings suggest that Bihar's future agricultural transformation will depend on productivity enhancement, diversification towards higher-value enterprises, stronger value-chain integration, and climate-resilient production systems, supported by expanded rural non-farm employment and agro-processing. By integrating structural analysis, production-decomposition, and econometric modelling within a unified analytical framework, the study provides a practical approach for evaluating value-led agricultural development and structural transformation in developing agrarian economies.