The Hindu Business Line : `Slowdown in public investment hits farm growth'

A slowdown of investment in agriculture, particularly public sector investment, has impeded adequate private sector investment in critical areas within the sector, the Reserve Bank of India said in its annual report of 2003-04.

The slowdown of investment in agriculture has impacted the pace and pattern of technological change, the RBI said. The ratio of gross capital formation in agriculture to real GDP originating in agriculture increased only by one percentage point from 6.1 per cent to 7.1 per cent. This was because share of the public sector in gross capital formation in agriculture fell from 33 per cent in 1993-94 to 24.2 per cent in 2000-01.

RBI also said that improving yield in agriculture is important given the limited scope for increasing area under cultivation of various crops. Besides, there has been a decline in land-holding size, increase in costs of production and depletion of ground water, the RBI said.

"Upgradation of technology and timely supply of all inputs also assume equal importance. There is also an urgent need to increase the availability of farm power to boost productivity," the apex bank said.

According to the RBI, another thrust area should be the promotion of organic farming to tap the export potential of organic products.

In terms of agricultural credit, the RBI said there were some problems that affected the flow of credit to agriculture. The credit-deposit ratio of rural branches of scheduled commercial banks declined from 49 per cent in 1995 to 42 per cent in 2002. Besides, there has been a decline in the proportion of medium/long-term loans in direct finance to agriculture from 41 per cent in 1990-91 to 31 per cent in 2000-01. "Prevalence of cumbersome legal systems, tenancy laws continue to impede the flow of credit to agriculture," the RBI said.

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