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The study of capital formation in a particular sector of an economy is crucial for assessing current and future prospects of its growth. The analysis of capital formation and investment in agriculture showed that after a steep rise in the seventies, the gross capital formation in agriculture in India, at constant prices showed a significant decline till the end of eighties, both in relative as well as absolute sense which was mainly induced by the absolute fall in public investment accompanied by stagnation in private investment. Besides confirming the complementarity of public and private investment in Indian agriculture, the present study observed that probably falling proportion of farm business investment is further the cause of sustained loss in profitability over the past. This trend together with increasing proportion of small and marginal operational holdings eroded the capacity of the farmers to invest in agriculture. The study also highlights the neglect of structural adjustment issues of the sector over the eighties and draws special attention to an urgent need to put in order conceptual and methodological framework for preparation of capital formation series.
Economic theory in the form of a thesis on capital formation and investment in agriculture in India - comprises an analysis of integrated time series data since 1920-1921 and cross-sectional data, and covers technological change, input output and capital worker ratios, the economic implications of family-type farming, credit, the cost of cultivation techniques, etc. Statistical tables by region of growth in agricultural machinery and livestock, and bibliography.
Agriculture sector still dominates the Indian economic scene by providing livelihood to majority of the population. In most of the developing countries including India, agricultural growth is a precondition for economic development. Agriculture and allied activities contributed nearly 50 percent to India’s national income. Around 72 percent of total working population was engaged in agriculture. Inspite of an impressive rate of growth in the GCFA, its share in the GCF in the economy has been found to be declining. Although some improvement was observed in the share of GCFA in the GCF of economy in 2001-02, at 8.65 per cent, it again fell to 6.96 per cent in 2010-11. Capital formation is usually defined as an addition to the stock of productive equipment’s over time. The terms ‘capital formation’ and ‘investment’ are used interchangeably though have some distinction. But at the present stage of development of Indian agriculture, an assessment of capital formation in the agriculture sector may miss many important items of investment which are not accounted. This is because of the fact that, majority of Indian agriculturists being poor subsistence farmers for whom farming is not a business enterprise but a mode of living, Capital investments on the farm generally take place through small bits of acquisitions and activities which lead to an improvement in their productive capacity. Sustained investment on productive assets in agriculture is a pre-requisite for augmenting agricultural growth.
Using the decennial All-India Debt and Investment Survey from 1981-82 to 2012-13, this paper delves into the spatial and temporal trends in private fixed capital expenditure and its composition, among rural households in India. We also assess its relationship with public investment in agriculture. Amidst sizeable ups and downs, the magnitude and rate of growth in private investment in agriculture has gained momentum from 2000s except in Odisha, Himachal Pradesh, Jammu and Kashmir. An increasing preference of farmers to invest in residential land and buildings, and that at the cost of asset formation in farm business, is evident in agriculturally advanced states. Within agriculture, relatively higher investments in land improvement, machinery-implements, tractors, and livestock are identified over the period. Importantly, such investments are positively influenced by public investments in agriculture and irrigation in the high and low income states and also by public spending on input subsidy in the middle and low income states. An increase in public expenditure that is well targeted and is commensurate with farmers’ investment portfolio would reinforce a complementary relation between the two across-the-board. The impact of terms of trade on private investment though positive turns out to be statistically insignificant. Land acts as a constraint, indicating need for policy interventions that augment crop yield and can bring remunerative prices to farmers. A continued effort to improve the outreach of formal financial institutions for credit is warranted for higher private capital formation.
First published in 1964, this series of studies, compiled by the India team of Centre of International Studies at MIT, represents an important contribution to methods in planning for development, which will be of relevance to all those working in the field, irrespective of country. The results are demonstrated on examples taken from the Third Five-Year Plan and from some of the papers which underlay it.