Determents of Capital Formation in Agriculture in the Eastern Dry Zone of Karnataka

The study focused on determinants of capital formation in agriculture in the Eastern Dry Zone of Karnataka. The results revealed that multiple linear regression model was significant as indicated by F ratios and R² value. The coefficient of multiple determinations (R²) revealed that the model was a good fit as indicated by a value of 0.92. The Higher levels of these factors, higher the capital formation and vice versa. In the case of less progressive area, variables like annual income, area irrigated, area under commercial crops, distance from town and borrowed amount are positive and significantly influenced capital formation for the pooled group of farms. As annual income of the farm increases by one rupee, capital formation would go up by 0.43. In the same way for one ha rise in irrigated area, capital formation would increase by 1, 07, 016. As area under commercial crops increase by one ha, capital formation would rise by 1701. In the same way a rise in borrowed amount by one rupee would result capital formation by 1.21. Interestingly as distance of the farm is longer from the town, capital formation tends to be more.

Investment, income and savings are the major indicators of economic growth and investment is the sine-qua-none of the economic development.

Study mainly focuses the factors influencing private fixed capital formation in agriculture in progressive and less progressive area of Eastern Dry Zone (EDZ) of Karnataka as we can find highly developed areas and most backward region in the Zone.

The regression analysis carried out to identify factors influencing capital formation in progressive and less progressive area showed that in the case of pooled farms, the variables, borrowed amount, area irrigated, area under commercial crops, annual income and distance of farm from nearby town significantly influenced capital formation.