Market Imperfections in Rural Areas: An Empirical Study for Murshidabad District, West Bengal, India

In developing countries rural households are exposed to market imperfections and constraints. Lack of access to crop market, presence of high transaction cost, existence of unemployment problems of various types, absence of insurance market for rural households in association with credit constraint and existence of problems of asymmetric information can be considered as the major sources of market failure in rural areas of a developing country. Market imperfections of different types induce some rural households to select production for food self-sufficiency to smooth out own consumption and income fluctuations which appears to be inefficient in strict Neo classical sense. Hence, understanding of sources and nature of market failure is important from the perspective of policies and programmes for rural development. In this context, the present study aims to capture the evidence of insufficient market participation by the small farmers of Murshidabad District of West Bengal and highlights the factors affecting the production and input use decisions of poor farmers. This study put emphasis on need for improvement ofthe working of markets and diffusing information on production technologies. Suitable credit schemes Minimum support price and improvement of educational level of farmers and extension services in rural Murshidabad are strongly required for attainment of technical efficiency by the resource poor farmers.