Following are the highlights of a DRG (Development Research Group) study by the RBI titled "Agricultural Growth in India since 1991". The authors have studied the movements in various factors post 1991 identified by past researchers as detrimental to agricultural growth in India. This study focuses only on crop agriculture and not other components of agriculture such as animal husbandry, fisheries and forestry. The main observations of the study are
- The period since 1991 has been a turning point for Indian agriculture when the growth in the sector resurgent from the middle sixties was arrested.
- An across the-board slowing of output and yield growth since 1991 for the two main groups (Food and Non-food) in Indian crop agriculture was witnessed.
- Shrinking farm size has been one of the reasons for a slowdown in the growth. Smaller holding-size makes it more difficult for the majority of Indian farms to access new technology and adopt more efficient forms of production.
- Thus capital intensive investment also called the 'land improvement factor' is very likely inconceivable for the largest number of Indian farmers today not only due to their meager asset base but also due to small holding size. The slower growth of yield since 1991 may, at least to an extent, be related to this aspect.
- Along with the shrinking farm size environmental/ecological stress is also reported for the agricultural sector which is reflected in loss of soil nutrients and declining water availability.
- This contributes directly to potential yield loss that can be compensated, if at all, only via greater expenditure which eventually increases cost of production which a smaller farm strapped for credit cannot handle.
- Capital formation in Indian agriculture is undertaken by both government and the private sector. However, there is an economic distinction between these. Almost all of the public investment is in the nature of a public good, i.e., it is non-excludable, and for that reason unlikely to be undertaken by the private sector.
- Hence, public investment is a vital input in the agricultural production but it has more or less remained stagnant since 1991.
- For agricultural production, irrigation is arguably the most important input after seed, and the most important element of public capital formation. However, growth in coverage of irrigated area in all the main crop categories has slowed in the nineties.
- Agricultural economists have long pointed to the importance of research and extension to the acceleration of agricultural growth in the past which enhance productivity. Since acreage expansion is more or less infeasible the future growth has to come from a rise in productivity.
- Hence, expenditure is imperative on research and extension front however, public support for expanding the knowledge base for agriculture is shrinking since 1991. Public expenditure on this item is low as a share of agricultural output in India by international standards.
- However, it should not be inferred from the entire study that these are the only problems faced by Indian agriculture and a solution to these problems will yield a greater growth but no doubt they are among the key and most talked about factors.
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Submitted by Himal Jasani on Thu, 25/06/2009 - 10:54