ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Agricultural GrowthSubscribe to Agricultural Growth

India’s Slowdown

Investments in industry have slowed down considerably in the recent years, as has agricultural growth. Falling levels of capacity utilisation, building up of food stocks and the state of liquidity in the economy sufficiently prove that the problem today is the lack of demand. Rural distress, rising inequality and falling real wages are driving down demand. The government’s response to the slowdown has been woefully inadequate. The biggest impediment to policymaking is not the lack of ideas, but the blinkered vision of economics.

Economic Reforms and Agricultural Growth in India

It was argued that economic liberalisation would ensure a favourable shift in the terms of trade for agriculture in India, enabling producers to plough back surplus from cultivation to make long-term improvements on land, and raise agricultural productivity and growth rate. Contrary to expectations, there was no noticeable improvement in the terms of trade for agriculture during the reform period. Moreover, decline in capital formation in agriculture, inadequate expenditure on irrigation and extension services in rural areas, and a dearth of cheap institutional credit, resulted in a slowdown of agricultural growth and heightened livelihood insecurity for a substantial proportion of those dependent on agriculture.

Terms of Trade, Trade and Technical Change

Neither barter terms of trade nor trade liberalisation can be alternatives to technical change for domestic agricultural growth. What is needed is an integrated farming system approach, which requires paradigm shifts in government and private expenditure on R and D in agriculture. Broad-based technical change in agriculture will make it internationally competitive, and also extend the fruits of this change to those who cannot on their own invest in it.

Public Sector Investment and Agricultural Growth

Ashok Gulati and Seema Bathla (May 19, 2001) have once again raked up the controversy regarding public investment in agriculture and its relationship with private investment and growth. What is however interesting here in their paper is the commendable attempt to re-define and re-estimate the official data on public sector capital formation, with a view to examine: (i) Has the public sector capital formation in agriculture really declined, as is generally made out? If so, what are the factors responsible for it? (ii) Is there any relation between public and private sector investment in agriculture? Do they complement or compete? (iii) How does the deceleration in public sector capital formation affect the rate of growth of agriculture? The purpose of this note is to make a brief comment on (i) and (iii) above, by way of a critique rather than a criticism. As regards (ii), the authors have taken the mainstream view. We do not find any reason not to subscribe to that view.
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