Capital Formation, Agricultural Growth and Poverty: State-wise Analysis of Inter-linkages during Pre- and Post-reform Periods

The public and private capital formation in Indian agriculture has increased manifold in the post-reform period compared to that in the pre-reform period. However, agricultural growth continues to hover around three per cent. This study has revealed that public and private investment in agriculture is unevenly spread across the states and so is the farm income. The states which have made heavy investment in irrigation, agriculture and infrastructure and pushed market-driven farm and agro-industrial policies, have accomplished higher rates of growth in the private investment and income. The frontrunners are: Andhra Pradesh, Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Himachal Pradesh, Jammu & Kashmir, Odisha and Karnataka. However, efficiency of investment has improved only in Gujarat and Odisha. The results obtained from random effect model have revealed investment by farmers is propelled by public spending on agriculture and infrastructure, credit, growing demand for value-added crops and allied activities. The findings have implications for capital deepening in both agriculture and food processing for accelerating growth in income and productivity and reducing poverty.