Growth and investments in Indian agriculture: Assessment of recent trends, breaks, and linkages

This paper reviews the recent trends in agricultural investments and output and tries to find structural breaks in the trends over the period of 1960-2016. Comparing the growth performance of various sub-periods based on breakpoints in the series the study finds that the recent agricultural stagnation spawns from a low capital formation in Indian agriculture. This has been further strengthened by the regression results where both public and private investments along with fertilizer consumption, HYV seeds, terms of trade, and weather pattern significantly affect the agricultural output (in terms of GDPA). We also find that there is an overall declining trend of efficiency of capital use in Indian agriculture. Given the efficiency and under the assumption of ceteris paribus, we find the warranted growth rate in private investment is around 5% and in public investment is around 2% to achieve the 4% growth target in agricultural output. Therefore, the policy implication of the study calls for an immediate arrest of the declining trend of public investment in order to stimulate more private investment. This may break the shackles of growth stagnation in Indian agriculture.