24
GCF to GDP ratio in agriculture steadily improved and touched around 20%
during the latest three years 2008-09 to 2010-11.
In this improved scenario of farm investment, there are certain special
features which are relevant for institutional credit absorption. First, public
investment in agriculture has shown a distinct improvement after 2004-05,
but its share in total agricultural GCF has remained low ranged between 15%
to 25% as compared with 40% to 50% share in the 1980s. While there have
been attempts to expand allocations of five-year plan funds for agriculture,
the increases have not been sufficiently large as to make a significant dent.
Therefore, the
Mid-Term Appraisal of the Eleventh Five Year Plan
(2007-
2012) bemoaned thus:
“The allocation to agriculture and allied sectors in the Centre’s Plan was
substantially increased from
`
21,068 crore in the Tenth Plan to
`
50,924
crore in the Eleventh Plan. However, as percentage of the total Central
Plan the share of agriculture and allied sectors continues to be around
2.4%, which increased to around 3% in 2007–08” (p.64).
More encouraging aspect of the trends in agricultural investment has
been the steady increase in private sector investment. Considering the fact that
public sector investment essentially takes place in bulk projects like large-
scale irrigation and water resource management, reclamation of wasteland and
public support services like the extension and farm research systems, private
investment in agriculture cannot be a substitute for public investment; it can only
supplement and derive inspiration from public investment. Notwithstanding
so, despite public investment being weak, private investment has considerably
improved. This improvement is associated with the rise in capital intensity of
agriculture as a result of intensive mechanisation of agricultural operations by
the farmers. The
Mid-Term Appraisal of the Tenth Five Year Plan
(2002-07)
wrote that there was a large increase in the capital intensity of agricultural
production during the 1990s, doubling the incremental capital-output ratio
(ICOR) from 2.0 to 4.0 (Planning Commission, June 2005, p.197). This
followed the sizeable increase in the real private sector investment “making
up much of the slack in public sector investment” which is what has helped
to accelerate the overall growth in agricultural investment. The private GCF
to agricultural GDP ratio shot up from 7.3% in 1998-99 to 12.5% in 2001-02,
ruled lower until 2006-07, but substantially improved thereafter to the highest
level of 16% to 17% during 2008-09 to 2010-11. Public GCF to agriculture
GDP touched the peak of just 3.7% in 2006-07 but persistently remained lower
thereafter [Table 2.9(b)]
