The paper examines the effective and efficient use of labour in Indian agriculture in the context of farm mechanisation. It explores the rationality of labour use in paddy production across states with the help of Stochastic Frontier Production Function analysis based on plot level data under the Cost of Cultivation Scheme during 2009-10. The study analyses the productivity, unit cost and farm income differentials and the variation in the extent of farm mechanisation and other inputs use in paddy production between and within states during 2004-05 to 2010-11. It also examines the impact of machine use on the production, productivity, cost and profitability in paddy production in India based on aggregated and disaggregated data. It is observed that there is no rational use of human labour in Indian agriculture (i.e., the present study rejects the hypothesis of equality between marginal productivity of labour and average wage rate). Machine use in agricultural production plays an important role in the increase in productivity and reduction of unit cost of production resulting profitable making farming viable in India. There is a great variation in the degree of farm mechanisation across Indian states but there is a good indication that inequality in input use and the variation in access to modern agricultural technology has decreased among the states during post-WTO period.