Articles by Ashok Gulati

Though the 16-point action plan for agriculture laid down in the 2020 Union Budget continues prioritising subsidies and safety nets over agricultural investments, it does not make any fundamental improvements in the allocations towards these heads.

Semi-arid Gujarat has clocked high and steady growth at 9.6% per year in agricultural state domestic product since 1999-2000. What has driven this growth? The Gujarat government has aggressively pursued an innovative agriculture development programme by liberalising markets, inviting private capital, reinventing agricultural extension, improving roads and other infrastructure. Canal-irrigated South and Central Gujarat should have led Gujarat's agricultural rally. Instead it is dry Saurashtra and Kachchh, and North Gujarat that have been at the forefront. These could not have performed so well but for the improved availability of groundwater for irrigation. Arguably, mass-based water harvesting and farm power reforms have helped energise Gujarat's agriculture.

More than any other budget, which has been presented in recent years, the budget for 2005-06 was expected to correct the neglect of the agricultural sector. The budget is noteworthy for its focus on creation of greater employment in rural areas through increased allocations for rural development and irrigation. It also acknowledges some of the important changes that need to be implemented in agriculture, including a policy for diversification, rationalisation and restructuring of subsidies and greater decentralisation. But are the fiscal allocations and the policy impetus emanating from the budget adequate to revitalise agricultural growth performance in the economy? In this regard, the budget falls short of expectations. Not much of an effort has also been made to cut the food and fertiliser subsidy and stimulate public investment in agricultural research and development. Institutional changes necessary to improve service delivery in rural areas have also not been addressed adequately.

South Asian countries are gradually diversifying with some inter-country variation in favour of high value commodities, namely, fruits, vegetables, livestock and fisheries. Agricultural diversification is strongly influenced by price policy, infrastructure development (especially markets and roads), urbanisation and technological improvements. Rainfed areas have benefited more as a result of agricultural diversification in favour of high value crops by substituting inferior coarse cereals. Agricultural diversification is also contributing to employment opportunities in agriculture and increasing exports. The need is to suitably integrate production and marketing of high value commodities through appropriate institutions. Market reforms in developing and strengthening desired institutions through required legal changes would go a long way in boosting agricultural growth, augmenting income of small farm holders and promoting exports.

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.