IMPACT OF INVESTMENT ON AGRICULTURAL GROWTH AND RURAL DEVELOPMENT IN HIMACHAL PRADESH

Abstract

newline ABSTRACT newlineAn attempt was made in this study to analyze the behaviour of agricultural investment in relation with agricultural growth and rural development in Himachal Pradesh. The study was based upon both primary and secondary data. Various mathematical and statistical techniques were used to analyze the data. The study at micro-level revealed that farm buildings and livestock constituted higher proportion of private investment under all the farming systems. The net investment as per cent of total capital stock revealed that the capital was accumulating at higher rate under fruit based farming system (FTFS) followed by vegetable based farming system (VFS) and food-grain based farming system (FFS). The pattern of village level public investment showed that relatively higher proportion of the investment was made on rural development under all the farming systems. The investment on irrigation was relatively higher under VFS while, the proportion of investment on rural infrastructure was higher under FTFS. Total public investment was comparatively higher in case of VFS. Per hectare public investment at state level increased almost three times from 1969-79 (period-I) to 1991-2001 (period-III). The intensity of the public investment increased from 12 per cent (period-I) to about 18 per cent of agricultural gross domestic product (AGDP) (period-II), but in later period it almost remained stagnant. The compound growth rates showed that there has been a decline in the growth rate of state level public investment from about 7 per cent during period-I to just 2 per cent during period-III. On the other hand, state level private investment in agriculture increased more than two times from first to third period. The intensity of private investment increased significantly from about 4 per cent to 6 per cent of AGDP over the years. Private investment showed declining trend during period-I but, later it showed an increasing trend and grew at an annual growth rate of about 8 per cent during third period. The results of correlation coefficients confirmed the existence of long term complemetarity between public and private investment. The analysis also revealed positive association of investment with AGDP, institutional credit to agricultural sector and terms of trade. The efficiency of capital used in agriculture was decreasing over the years as evident from calculated incremental capital-output ratio (ICOR) and marginal efficiency of capital (MEC). The estimates of micro-model revealed that average size of holdings, gross farm returns and dummy for off-farm income were the significant determinants of total capital stock on farm under all the farming systems. Expenditure on variable input was found to have negative impact on capital stock under FTFS while, their relation was not statistically significant under other farming systems. Total capital stock on farm, cropping intensity and per cent area irrigated were found to have positive influence on gross farm returns. Level of education was found to be an important determinant of total capital stock as well as gross farm returns. The estimates of simultaneous equation model for the state as a whole revealed that agricultural investment played a crucial role in rural development not only directly by alleviating rural poverty but, also indirectly by improving agricultural growth and employment in non-farm sector. Considering the direct impact of investment on agricultural growth and development, the declining trend in the public investment needs to be reversed. Moreover, number of problems/constraints were observed that thwart investment in agriculture. But all these problems seem to be somewhat interlinked and need to be tackled through holistic and systematic approach. Based upon the findings it could be claimed that the intensity of investment particularly on irrigation, infrastructure, rural development and soil and water conservation, etc. should be improved. Private investment in agriculture must be encouraged by providing the necessary support like credit, cheap power, tube well subsidy, etc. Capital use efficiency in state agriculture should be improved by developing and disseminating hill specific tools and implements and by dissemination of package of appropriate technology. newline newline