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Transitioning India's Public Expenditure in Agriculture towards Higher Growth and Equity

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  • Singh, Alka
  • Pal, Suresh
  • Jha, Girish Kumar

Abstract

The study aimed to develop broader series of public expenditures and investments impacting growth of agriculture and allied sectors and explored how sectoral and regional priorities of agricultural investments had responded to the national priorities by tracing their growth linkages. The study indicated that following a period of stagnation in the 1990s, public expenditure on agriculture and allied sectors has stepped up in the mid-2000 decade. Further, the broad observations do not corroborate the idea of neglecting marginal agro-eco-regions as far as public investment in agricultural research is concerned. However, higher infrastructure and agricultural research investment priority should be given to relatively backward states of eastern India, as the region still has poor infrastructure and higher concentration of subsistence producers which make private sector hesitant to invest. Enhanced public investment is justified to strengthen infrastructure and also attract private investment leading to high pay-offs as the region is well endowed with natural resources. The other issue relates to prioritisation of public resources towards those sectors and regions where presence of market failures or core distributional concerns exists. The public resources should increasingly be deployed to produce goods and services that are not produced by market actors. The rising government spending under revenue account on agri-inputs and farm support services can also have a crowding-out effect on private investment. Studies have shown that the biggest payoffs for reducing rural poverty and increasing growth came from investments in R&D and infrastructure and that too from backward regions. These investments must, therefore, be treated as a composite strategy for rural development and a sustained step-up in investments should be maintained in order to benefit agriculture, given that the benefits from these investments tend to materialise after a considerable time lag. The policy shift towards raising capital expenditure in rural infrastructure and irrigation would translate into economic gains only, if it is backed by responsive institutions as they form part of the enabling environment for private investment.

Suggested Citation

  • Singh, Alka & Pal, Suresh & Jha, Girish Kumar, 2015. "Transitioning India's Public Expenditure in Agriculture towards Higher Growth and Equity," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 70(3), pages 1-13.
    • Handle: RePEc:ags:inijae:230050
    DOI: 10.22004/ag.econ.230050
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    References listed on IDEAS

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    1. Landes, Maurice R., 2008. "The Environment for Agricultural and Agribusiness Investment in India," Economic Information Bulletin 58628, United States Department of Agriculture, Economic Research Service.
    2. Birthal, Pratap Singh & Joshi, Pramod Kumar & Negi, Digvijay S. & Agarwal, Shaily, 2014. "Changing sources of growth in Indian agriculture: Implications for regional priorities for accelerating agricultural growth:," IFPRI discussion papers 1325, International Food Policy Research Institute (IFPRI).
    3. Vinoj Abraham, 2008. "Employment growth in rural India: Distress driven?," Centre for Development Studies, Trivendrum Working Papers 404, Centre for Development Studies, Trivendrum, India.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Pal, Suresh & Rahija, Michael & Beintema, Nienke M., 2012. "India: Recent developments in public agricultural research," ASTI country notes 127527, International Food Policy Research Institute (IFPRI).
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