Capital Formation in Indian Agriculture

Abstract

This chapter examines the trends in public and private capital formation in agriculture during the past 25 years, focusing on factors that affect growth in various types of investment. It analyses how the growth of public investment in agriculture declined sharply in the 1980s and stagnated in the early 1990s. It also looks at the negative impact of growing subsidies on public investment in agriculture and shows that the anti-agricultural bias of the reforms regime contributed to the decline in the combined public outlay on capital formation and subsidies in agriculture as a share of gross national product during the 1990s. Based on capital expenditure on agriculture and related activities as an indicator of public capital formation at the state level, the chapter argues that public investment is important in reviving the agricultural sector.