Investment in Agriculture - Issues and Concerns


The investment is considered to be the prime mover of growth as the amount invested determines the required growth in income via the operations of multiplier and accelerator effects. For Indian agriculture, where there is no further scope for area expansion the deepening of the capital through larger public investments in land and water is the necessary pre requisite for its growth. Therefore, more of public investment would lead to higher productivity and growth in agriculture.

Further, given the complementarity/inducement effect between public and private investment, increased public investment in agriculture would induce more private investment. A study on the trend of capital formation in agriculturally better developed states like Andhra Pradesh and Tamil Nadu, it is seen that public capital formation contributes to a growth in private investments.

The corporate sector can play a vital role in accentuating investments in agriculture sector. However, it is yet to take place in a big way. It may also be stated that the corporate sector may not be substitute for public capital formation in terms of volume and impact.

The rapidly declining farm size and the changing pattern of operational holdings may be another factor which has affected capital formation in agriculture by the private sector.

Benami landholders and absentee landlords do not generally show interest in creating permanent assets in the agriculture as their interests are elsewhere and hence for this substantial part of land holdings, capital formation does not take place as banks are also unable to provide term loans due to lack of security. Similarly, farmers Who take land on lease also do not show much interest in creating assets in the agriculture sector as their tenure is not certain and is generally given on an annual basis in view of the fear of creating tenancy rights.

Lack of proper implementation of land reforms in the country has resulted in not allocating lands to the landless and property rights were not conferred to the landless tillers. As the landlords owning substantial number of acres of land which are above the prescribed land ceilings, they are unable to cultivate the entire 16 landholding by themselves and therefore they are not able to invest substantial amounts for capital formation in this sector.

Small and marginal farmers who account for about 70 per cent of operational holdings and 29 per cent of the operated area, are generally interested in formation of capital base but their investible surplus is too limited to allow substantial investments in fixed assets. Public and private investments are complementary rather than a substitute for each other and thus a fall in public investment affects private capital formation in agriculture.

A strong Long Term perspective plan for rural infrastructure need to be given a policy thrust. “Exclusive” planning may be brought out for rural infrastructure based on economic profile of the States. Sector-wise master plans have been prepared by some State Governments. Other may prepare similar such master plans for better policy planning for promoting rural infrastructure. With the announcement in the Union Budget, such planning would facilitate implementation of projects under emerging areas like „Rurban‟.Micro infrastructure has been a high impact infrastructure in rural areas. But the micro infrastructure has not been adequately addressed both in planning and funding by Government.

Wednesday, 22nd Jun 2016, 09:18:15 AM

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