Advertisement

Investment Behaviour of Farmers Across Indian States: Determinants and Impact on Agriculture Income

  • Seema Bathla
  • Yashi Kumari
Chapter

Abstract

This study examines the investment behaviour of farmers using the decennial National Sample Survey Debt and Investment Survey (Schedule 18.2) from 1981 to 2012. It begins with an analysis of spatial trends and variations in the composition of fixed capital expenditure followed by factors that determine investment in agriculture and its impact on farm income. The analysis reveals a phenomenal increase in per household investment from Rs. 2133 in 1981–82 to Rs. 6993 in 2012–13 at 2004–05 prices. Of this, residential land and buildings constitute a sizeable share at 68% followed by farm business at 23.3% and non-farm business at 8.7%. Capital expenditure on residential land and buildings has grown at a much higher rate (4.7%) compared to that in farm and non-farm businesses (2.52 and 3.31%), respectively, during this period. Growing urbanization, expansion in industrial activities and low income from cultivation may have made investment in land lucrative relative to farming. A changing investment priority of farmers has implications for agricultural growth as it is done at the expense of farm assets. A slight upturn in investment in farm business has taken place during the 2000s, but its composition continues to be dominated by irrigation structures, transport and machinery and implements. Large interstate and farm size disparities in capital expenditure continue to persist. Further, nearly 86% of farm investment is carried out through loans of which the share of institutional borrowings is 63.4%, which should be scaled up. The empirical analysis based on three-stage least squares lends support to these findings as investment in agriculture is found to be adversely affected by farmers’ changing preference and positively by institutional borrowings and public investment. Private and public investments together with favourable incentive structure and infrastructure development exert positive and significant impact on agricultural income. The study emphasizes on upholding farmers’ interest in agriculture in view of rapid changes in their investment priorities. For this, role of the respective state government stands imperative in scaling up resource allocation and institutional credit to agriculture.

References

  1. Baltagi BH (1996) Econometric analysis of panel data. Wiley, New YorkGoogle Scholar
  2. Bathla S (2016) Investments and subsidies in Indian agriculture: Recent trends and Implications. In: Haque T (ed) Agrarian distress in India: causes and remedies. Concept New DelhiGoogle Scholar
  3. Bathla S (2014a) Public and private capital formation and agricultural growth: State-wise analysis of inter-linkages during pre- and post-reform periods. Agr Econ Res Rev 27(1):19–36CrossRefGoogle Scholar
  4. Bathla S (2014b) Agro-industry: the food processing sector, chapter 13 in India: accelerating agricultural productivity growth. World Bank, Washington D.CGoogle Scholar
  5. Bathla S, Thorat SK, Joshi PK, Bingxin Y (2017) Where to invest to accelerate agricultural growth and povery reduction? Econ Pol Weekly 52(39):36–45Google Scholar
  6. Binswanger HP, Shahidur RK (1992) How infrastructure and financial institutions affect agricultural output and investment in India. J Dev Econ 41:337–366CrossRefGoogle Scholar
  7. Bisaliah S, Mahendra DS (2010) Private capital formation in Indian agriculture: an analysis of farm level data, Report submitted to the Food and Agriculture Organisation, Rome, DecemberGoogle Scholar
  8. Bisaliah S, Mahendra DS, Saifullah S (2013) Investment in Indian agriculture: Macro and micro evidences. Academic Foundation, New DelhiGoogle Scholar
  9. Chand R (2000) Emerging trends and regional variation in agricultural investments and their implication for growth and equity. Policy Pap No. II, NCAPGoogle Scholar
  10. Chand R, Kumar P (2004) Determinants of capital formation and agricultural growth: Some new explorations. Econ Pol Weekly 39(52):5611–5616Google Scholar
  11. Chand R, Parappurathu S (2012) Temporal and spatial variation in agricultural growth and its determinants. Econ Pol Weekly 47(26&27):55–64Google Scholar
  12. Chand R, Saxena R, Rana S (2015) Estimates and analysis of farm income in India: 1983–84 to 2011–12. Econ Pol Weekly 50(22):139–145Google Scholar
  13. Chandel S, Swarup G (2015) Rural banking system through credit and its effect on agricultural productivity in Nagrota Bagwan block in Kangra district of Himachal Pradesh. J Manage Sci 5(1):83–90Google Scholar
  14. Chavan P (2013) Credit and capital formation in agriculture: a growing disconnect. Soc Sci 41(6):1–10Google Scholar
  15. Dhawan BD (1998) Studies in agricultural investments and rural savings. Common Wealth Publishers, New DelhiGoogle Scholar
  16. Dhawan BD, Yadav SS (1995) Private fixed capital formation in agriculture: Some aspects of Indian farmers’ behaviour. Econ Pol Weekly 30(34):A103–A109Google Scholar
  17. Dhawan BD, Yadav SS (1997) Pubic investment in Indian agriculture: trends and determinants. Econ Pol Weekly 32(14):710–714Google Scholar
  18. Fan S (ed) (2008) Public expenditures, growth and poverty: lessons from developing countries. Oxford University Press, New DelhiGoogle Scholar
  19. Fan S et al (1999) Linkage between government spending, growth and poverty in rural India, Research Paper No. 110. International Food Policy Research Institute, Washington, D.C.Google Scholar
  20. Gallerani V (2008) Investment behaviour in conventional and emerging farming system under different policy scenarios. JRC scientific and technical reports. Inst Prospec Tech Stud 1–187Google Scholar
  21. Gandhi VP (1990) Investment behavior in developing countries: the case of agriculture in India. Food Research Institute Studies 22(1):45–82Google Scholar
  22. GOI-N.S.S.O. (1998) Household capital expenditure during 1.7.91 to 30.6.92: Debt and Investment Survey, 48th Round. Ministry of Planning and Programme Implementation, Govt. of India, New DelhiGoogle Scholar
  23. GOI-N.S.S.O. (2006) Situation Assessment Survey during 1.7.2002 to 30.6.2003, 59th Round. Ministry of Planning and Programme Implementation, Govt. of India, New DelhiGoogle Scholar
  24. GOI-N.S.S.O (2014) Key Indicators of Debt and Investment in India 70th Round (2012–13). Ministry of Planning and Programme Implementation, Govt. of India, New DelhiGoogle Scholar
  25. Government of India (1980 to 2014). Agriculture statistics at a glance. Ministry of Agriculture, New Delhi Google Scholar
  26. Gulati A, Bathla S (2002) Capital formation in Indian agriculture: trends, composition and implications for growth. NABARD Occasional Paper No. 24. Also published in Econ Pol Weekly (2001):1697–1708Google Scholar
  27. Gulati A, Narayanan S (2003) Subsidy syndrome in Indian agriculture. Oxford University Press, New DelhiGoogle Scholar
  28. Misra VN, Hazell BR (1996) Terms of trade, rural poverty, technology and investment: the Indian experience 1952–53 to 1990–91. Econ Pol Weekly 31(43):A2–A14Google Scholar
  29. Rath N (1989) Agricultural growth and investment in India. J Ind School Pol Econ 1(1):64–83Google Scholar
  30. Roy BC, Pal S (2001) Incremental capital-output ratio in Indian agriculture. Agr Econ Res Rev 14(1):34–46Google Scholar
  31. Sidhu RS, Gill SS (2006) Agricultural credit and indebtedness in India: some issues. Ind J Agr Econ 61(1):11–35Google Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2017

Authors and Affiliations

  1. 1.Centre for the Study of Regional DevelopmentJawaharlal Nehru UniversityNew DelhiIndia

Personalised recommendations