ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Capital Formation in Indian Agriculture

Is capital formation in Indian agriculture really declining? How and to what extent has it affected growth in agriculture? These questions have been at the centre stage of a debate sparked off in the late 1980s. This paper re-visits this debate by dissecting different components of capital formation, by digging into the very concept and estimation procedures followed in the Indian system of National Accounts vis-à-vis the UN system. The study, after re-defining and re-estimating trends in capital formation in agriculture, concludes that the situation is definitely not good, but not as alarming as is sometimes made out to be. This is because of the increasing share and role of private sector investments in agriculture over time. And the trend in that has remained robust despite decline in public sector capital formation in agriculture, and despite the fact that public sector investment has an inducement effect on private sector capital formation. This only goes to suggest that private sector investment in agriculture has been increasingly influenced by other factors, especially the terms of trade. And this has implications for the structure of growth within agriculture.



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