^ INTERSECTORAL TERMS OF TRADE 11 movement of overall agricultural prices to overall industrial prices. The Tyagi Index is possibly more accurate, reflecting the ratios of prices received for commodities sold by agriculture to the prices paid for commodities paid for commodities purchased by agriculture. Nonetheless the two indices broadly tend to move together. Three main sub-periods, or phases, are easily identifiable: the first, 1952-53 to 1963-64, when terms of trade tended to move against agriculture; the second, 1964-65 to 1973-74, when agricultural prices rose faster and terms of trade accordingly swung in favour of agriculture; and finally, the most recent phase, 1974-75 to 1984-85 when the tendency has clearly been for terms of trade to move against agriculture once again.1 This series does not give an idea of the income terms of trade (barter terms of trade multiplied by marketed surplus). But the increase in marketed surplus for the entire period after 1960-61 suggests that income terms of trade have generally been favourable, and certainly have moved less adversely against the agricultural sector in the more recent'period. Thamarajakshi2 found that the elasticity of marketed surplus with respect to output was around 1.46 for the period 1960-61 to 1973-74, and from the mid-60s to the mid-70s, the income terms of trade increased by 51 per cent more than the barter terms of trade. Given that middle farmers (holding 4-10 hectares) tend to sell around 35 per cent of their output while large farmers (more than 10 hectares) market more than 55 per cent of their produce,3 it would be reasonable to expect that output increases in the 1970s, which have been concentrated in these size groups, would also imply increases in marketed surplus. This must have operated to mitigate the adverse effects of falling barter terms of trade facing surplus cultivators (net sellers of agricultural products). What explains these shifting trends in intersectoral terms of trade? Most explanations hinge on the role of the State in fixing prices, thus suggesting a political determination. Early statements of an 'urban bias' of the State by Lipton, have been implicitly accepted and reiterated by Kahlon and Tyagi4 and Swamy artd Gulati5 among others. They suggest that the overall trend of prices has been unfavourable for the agricultural sector, barring a brief period when terms of trade were more conducive to agricultural growth. Particularly since the peak of the early 1970s, they argue that relative price conditions have been continually and progressively adverse, implying the worsening economic status of the rural population in general and creating disincentives for investment in agriculture. Conversely, Mitra6 argued that the terms of trade movement in favour of agriculture from the mid-1960s to the mid-1970s was a result of government operations in the foodgrains market and price setting by the APC, which were themselves largely influenced by the political lobbying power of the rich farmer class. Chakravarty7 also suggested that the government policy of price support matched by buffer Stocks operations had operated to increase the prices of certain agricultural commodities faster than the overall price level.