Misplaced Priorities and Lopsided Investments: A Macroscan of Agriculture, Livestock and Fisheries Sectors in India

This paper captures the performance of the agriculture, livestock and fisheries sub-sectors in terms of capital formation, incremental capital output ratio and relative contribution of these sub-sectors to gross domestic product during the period 2004–05 to 2010–11. The Gross Fixed Capital Formation (GFCF) in fisheries took off at around 6 per cent in 1990, peaked at around 16 per cent in 1999 and has been hovering around 10 per cent for the past 5–6 years. But, the GFCF in agriculture turned positive after 1999, and reached a maximum of 5 per cent, while GFCF in livestock, turned positive only in the X^th Plan period and still remains below the 5 per cent mark. The investment elasticity of growth (IEG) in agriculture has been found fluctuating during 1981–2011, while that of the livestock and fisheries sub-sectors has been found improving. In all the three sub-sectors, when the investment elasticity is higher, the Incremental Capital Output Ratio (ICOR) is lower and vice-a-versa. The investment efficiency ratio (IER) has been found increasing in agriculture and fisheries, and reducing in the livestock sub-sector. Despite the fact that agriculture is the largest private investment sector in India, the investment elasticity is low and the ICOR is high, indicating the need for a relook at the composition and direction of investment in agriculture and livestock sub-sectors. The estimates of IEG in the fisheries have been found positive but, the ICOR is declining, indicating an increased output resulting from the increasing capital formation. The cointegration analysis has revealed a long-run equilibrium of time series with a common ground in the values of agriculture, livestock and fisheries GDP and GFCF. The ICOR in livestock has been found declining, indicating an excess capacity of capital in this sub-sector despite the fact that the IER has been marginally positive. The excess capacity could also arise because of misdirected investments in areas within the livestock sub-sector. Some broad leads have been derived from the results.