Trends and Composition of Capital Formation in Indian Agriculture: An All-India Analysis

Beginning from the onset of the present century till now, there has been a consistent effort on the part of the government to increase capital formation in agriculture. Government has aimed at reversing the trend of decline in public capital formation in agriculture witnessed during 1990s by giving special importance to the sector in the five year plans as well as annual budgets. These efforts were aimed at accelerating the growth of public capital formation in agriculture. Furthermore, there have been focussed initiatives on the part of the government to improve the level and growth of private capital formation in agriculture. These were well indicated in the form of massive outlays for the sector in the budget, numerous policies to increase rural credit, incentive packages, debt waiving initiatives for farmers and other schemes. It was expected that an off shoot of these efforts will be an acceleration of term investments in the agricultural sector. The present paper explores this issue and analyses the growth and composition of capital formation in Indian agriculture. It was found that capital formation in agriculture grew at a remarkable rate over the period of study. The policies of the government aimed at increasing public and private capital formation in agriculture did result in increase in fixed capital investments in the sector. Furthermore, though there has been an increase in the share of public capital formation in agriculture, private sector still has a dominant role as far as flow of capital funds to the sector is concerned.