  Agriculture plays a significant role in economic development of the
underdeveloped region. Multiple factors influence the performance of
agricultural sector but a few of these have a strong bearing on its growth. We
develop a growth diagnostics framework for agricultural sector in Bihar located
in eastern India to identify the most binding constraints. Our results show
that poor functioning of agricultural markets and low level of crop
diversification are the important reasons for lower agricultural growth in
Bihar. Rise in the level of instability in the prices of agricultural produces
indicates a weak price transmission across the markets even after repealing the
agricultural produce market committee act. Poor market linkages and
non-functioning producer collectives at village level affect the farmers
motivation for undertaking crop diversification. Our policy suggestions include
state provision of basic market infrastructure to attract private investment in
agricultural marketing, strengthening the farmer producer organisations, and a
comprehensive policy on crop diversification.
