This time I would just like to focus Gross Capital Formation (GCF) in agriculture which is a proxy of investment made in that sector.
Share of agriculture in total GCF in the economy (%)
Source: Economic survey
As the table shows, there is a continuous decline the share of agriculture, as far as investment is concerned. As of now, GCF in agriculture account for a measly 5.7 per cent to total GCF while agriculture accounts for close to 20 per cent of India’s GDP. In a related finding, a World Bank Working Paper (M. Ravallion, 2002) showed that whenever there is a need for contraction in spending by the government, social sector tends to be worst affected.
Indeed, investment in this sector remains a soft target as the government continues to struggle with its expenditure management, given its profligate ways. Even when the economy was growing at around 9 per cent and revenue was growing fast, deficit continued to be a bugbear. Conservation of resource as a policy did not find favour. Hence, the government of the day followed the easy way out, that of statistically reducing the deficit by removing a few items from the ambit of deficit calculation, irrespective of the fact that financing of those items continue to burden the economy.