Professional Documents
Culture Documents
Sacrifice of rural invesstments by channeling resources to meet defence needs (1962 &
1965 wars)
1. 1966-1972
2. 1973-1980
3. 1931-1990
First Phase 1966-1972
Nationalisation of Banks
Nationalisation of wholesale trade in wheat. The traders were blamed for the fluctuations
in prices because of their speculative motives.
o Retention price was fixed by Govt. and the difference between MRP and retention
price was paid by Govt. as subsidy (1977-2003)
Increase of fiscal expenditure as food grain subsidies other than fertilisers (4% of agri
GDP 1980 up from 0.5% in 73)
Extension of HYV from rice to wheat and growth of foodgrain production in other parts
of country aided by tubewell
The increase of production by HYV was exhausted, to keep the food production growth
high the fertiliser subsidies were increased
Liberalisation 1991
Liberlisation of trade, flexible exchange rates
Effects on Agriculture
Liberlisation led to higher growth in per capita income led to diversification of food
demand - non-food products like meat, pulses, poultry
lowering of industrial protection led to better domestic ToT between agricultural and
industrial price
o this led to private investments mainly focused towards non food grain section
Agri growth 3/80s --- 4.1/91-96 but did not translated in decrease in poverty %
Increase in inequality
Variability in production
Earlier there used to be a bad year with negative growth in agri. in every 5 years. No
negative growth year since 2002-03
But given the decrease in groundwater, variable rainfall and climate change the decrease
in variability is commendable
excessive price based focus than the non-price factors like water, infra, R&D, extension
services
Major increase in Gross Capital Formation is in labour saving machines, irrigation and
water saving equipment
Bulky subsidies in planned expenditure of agri. rather than channeling it into investments
o Investments will spur growth of capital formation -> high and sustained growth
o no political incentives to decrease the subsidy bill
DEBATE - Role and complementarity of Public and private investment for Capital Formation
in Agri
Complementarity and substitutability of private and public investment is debated
Public investment induces private investment (inducement effect) [established]
Arguments against substitutability
Public investment creates 1. public goods and do 2. core investment (infra development) so
are not substitutable by private
Private investments leads to inequity
Private Sector Investment - short-term asset building - mechanisation, groundleveling, private irrigation
Decrease in Agri growth Rate since mid 90s is attributed to (and other problems like
low productivity, low employment opportunity, high intensity of poverty and
inadequate infrastructure are also attributed to )
UNWFP - recomends more public investmment in agri -> stop the fall of agro .
productivity
"Yield Reservoir" - low yield of the land should be treated as yield reservoir and should
be treated as asset for future development
Governmental roadmap for agri development through enhanced capital formation (10th five year
plan)