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

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.

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Journal Article
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Published in:
Indian Journal of Agricultural Economics, Volume 70, Number 3
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JEL Codes:
E62; Q16; Q13; Q14.

 Record created 2017-04-01, last modified 2017-04-28

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