In the recent era of rapid economic changes, slow agricultural growth has become a major area of concern in academic and public domains. In order to galvanize this sector, there are increasing efforts from various corners of the economy through an alternative institutional arrangement. In response to this, contract farming has evolved as an alternative institution. However, there is a growing debate in the academic world whether contract farming would benefit Indian agriculture or not. The pro-contract farming researchers argue that the contract-farming system could raise the income of farmers by increasing productivity. The critics argue that contract production is one mode of capitalist penetration into agriculture for capital accumulation and exploitation of the farming sector. This even leads to loss to the farmers and gain to the companies. However, the contractual arrangement depends upon the structure of the economy and how the market functions. The present study tries to analyze how the contract-farming system would be suitable for agricultural development by considering a village from the state of Orissa, whose economy is closely associated with a sugar industry. The study concludes that by entering into the contractual arrangement, the income level of the farmer and employment level in the rural economy has increased despite certain problems faced by the farmers like delayed payment, delay in procurement and low supply of agricultural inputs to them.
