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Rural Infrastructure and its Impact on
Agricultural Performance in India
Kousik Das Malakar Centre for the Study of Regional Development, School of Social Sciences,
Jawaharlal Nehru University (JNU), New Delhi, India
E-mail: [email protected]
Abstract- Aim and Objectives: In India, agricultural performance has changed from the pre-green revolution period to
a recent period based on various multidimensional rural infrastructure i. e., physical, socio-economic and financial. In
this paper, quantifying the roles of rural infrastructure to the development of productivity as well as overall
performances of rural cultivation. Mainly, focused the performance of rural infrastructure in India over decades and
across the states, to measure the relationship between rural infrastructure and agricultural productivity, analyses the
relationship between capital formation and infrastructure allocation over decades and across the states and analysis the
rural investment both public and private in India associated with agriculture over decades and across the states and to
analyses the increasing importance of one kind of investment more than the others.
Methods: Also using the infrastructure index, Least Square Method, Pearson Correlation Method ®, Matrix Table
Method, Normal Classification Method and various measurement techniques of STATA 12, Excel 2013, and ArcGIS
10.2.2 applications.
Result: As a result, over time the rural infrastructure has been changed towards development, distribution of rural
infrastructure influences (+/- Ve) the agricultural performance, infrastructure allocation has formed capital formation in
agriculture in India and private investment in rural infrastructure associated with agriculture is becoming more
important than public investment in over the years. So, the need for more development of rural infrastructures because
the growth of agriculture is the most important for the development of rural employment as well as the Indian economy.
Keywords – Agricultural Productivity; Infrastructure; Indian Economy; Gross Cropped area; India
I. INTRODUCTION
Indian rural infrastructure mainly includes very basic factors like rural tracks, roads, bridges, agricultural field,
irrigation systems, drinking and irrigation water supplies, electrification, health centers, schools, and markets that
are needed in rural areas for the local population to fulfill their basic needs and live a socio-economic productive
life. There are various indicator play the role of to maintain the rural infrastructure. The nature of rural infrastructure
in India are multidimensional, it can be classified as physically, socio-economically and financially (Table.1).
Agricultural performance is also measured by multiple factors such as Agricultural productivity like the
market value of final agricultural output. The productivity of agricultural is measured as the ratio of agricultural
outputs to agricultural inputs, this output value may be compared to many different types of inputs like agricultural
land, labor, investments, and yield etc. Whereas capital formation in agriculture involves making more capital goods
such as machines, tools, transport equipment, materials, factories, electricity, etc. which are all used for future
production. The capital investment is measured in terms of Gross Capital Formation (GCF) (macroeconomic
concept) relative to the country's Gross Domestic Product (GDP). The UN paper on capital formation defines it like,
“expenditure on machinery, equipment, buildings and other constructional works. Measured in this fashion capital
formation is related to an increase in the production capacity of enterprises”. Bowring (1963) and Schultz (1964)
recognized the importance of capital formation not only in economic development but also in the agricultural sector
especially in the case of the low capital base of farmers. Capital formation in agriculture is mainly of two types-
public and private. Private investment in agriculture comprises both household investments and the corporate sector.
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Volume IX Issue II FEBRUARY 2020
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Household investment in agriculture includes investment in different items like irrigation, transport, electricity i.e.,
mainly the rural infrastructure.
Tab
le.1
Ru
ral
infr
astr
uct
ure
Factors
Scope
Indicators
Ph
ysi
cal
Most commonly used.
Encompasses tangible
things.
Known as ‘Hard
Infrastructure’
i. Road density.
ii. Gross irrigated area as
% of total cropped.
iii. Consumption of
electricity in rural
sectors as % of total
Supply. S
oci
al
Mainly related to health and
education which are known
‘Merit goods’.
i. Infant Mortality.
ii. Gross Enrolment Ratio
in upper primary class
area.
iii. Educational
institutions per sq. km.
Fin
anci
al
Brings the monetary side of
the economy, also As ‘Soft
Infrastructure’.
i. Credit- Deposit ratio.
ii. Banking offices per sq.
km.
iii. State’s own tax
Revenue to GDP Ratio.
In India, agricultural performance has changed over the years; starting from pre-green revolution period (1951)
through the initial period of green revolution (1961), maturing period of green revolution (1971), matured period of
green revolution (1981), during and post-liberalization period (1991), post-National Agricultural Policy (2001) to
recent period (2011). Similarly, changes in rural infrastructure have also occurred along with the changes in the
pattern of investment both in public and private sectors. This paper aims to analyze the relationship between rural
infrastructure (considering only the physical indicators) and agricultural performance in India on a temporal scale as
well as represent its state-wise variation in liberalization and post-liberalization era i.e. from 1991 to 2011.
II. REVIEW OF LITERATURE
Since agriculture continues to be a major source of livelihood in rural India, the growth of agricultural productivity
is essential for improving the standard of living in India. The growth in agriculture is highly dependent on the
development of rural infrastructure which is dependent on private and public investment into it. Scholars and authors
have given various views as follows;
Bhatia (2014) proposed to make the state-wise a composite index of rural infrastructure and examines the
relationship between infrastructure development and levels of agricultural growth and production. He told that in a
developing economy like India, infrastructural facilities are generally weak and inadequate. The significance of a
strong infrastructure has been well-recognized by the government. The united overview in its Common Approach to
Major Policy Matters and Minimum Programme (1996) observed that "Investment in infrastructure need to be
stepped by from the present 3.5-4.0 percent to at least 6 percent of GDP in the next few years". The major indicators
of infrastructure as identified in the planning process include irrigation, transport, communication, power, education,
health, etc. Among these major heads, there are sub-items of rural infrastructure which have a direct bearing on
agricultural development. Index of rural infrastructure is calculated and its spatial variation has been shown in 1990-
95. The result shows that the estimated functional relationship indicates that the index of infrastructure is
significantly influencing the per hectare yield of food grain and the value of agricultural output in the states. The
coefficient of multiple determinants (R2) showed that about 68.25 and 42.10 percent of the variability per hectare in
yield of food grain and agricultural output in different states is explained by the index of rural infrastructure. With a
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unit increase in the index of rural infrastructure, the average yield of food grain increases by about 47 kg. This study
has established a strong relationship between rural infrastructural development and the level of per hectare yield of
food grain as also of the value of agricultural output. There is scope in the future for increasing the yield of food
grain and agricultural income by improving the rural infrastructure. It has also shown that states like Rajasthan,
Bihar, Madhya Pradesh, Orissa, etc. have poor infrastructure and low levels of the yield of food grain and output per
hectare. Indicators that required special attention for infrastructural development in different states have also been
indicated. The development of infrastructure in these states requires large-scale step up in investment in these
sectors, which may be restricted because of financial resources.
However, if economic development is to be occurred in the country, particularly in less developed states,
then financial resources need to be raised for improving infrastructure either by preferring the allocation of
government resources or raising investment from private sources. Though the priority allocation of financial
resources in infrastructure may affect the development of other sectors in the short run, returns from this in the long-
term perspective would be enormous in terms of the higher rate of economic development.
Andersen and Shimokawa (2006) proposed that agricultural growth is essential for rural development,
economic growth, and poverty alleviation in low-income developing countries like India. An increase in
productivity is an effective driver of economic growth and poverty reduction both in agricultural and non-
agricultural sectors. Such an increase in productivity depends on good rural infrastructure but the lower-income
developing countries suffer severe rural infrastructure deficiencies like, energy, telecommunication, transportation,
markets, etc. The significance of good infrastructure for agricultural development is widely recognized. They
analyzed how physical infrastructure contributes to agricultural development in developing countries. Transport,
telecommunications, electricity supplies, Roads, and other infrastructure services are limited in rural areas (WFS,
2000). These conclusions are supported by several studies in infrastructure in developing countries. These studies
demonstrated that infrastructural investment is essential to increase farmers’ access to input and output markets, to
stimulate the rural economy and vitalize rural towns, to increase consumer demand in rural areas and to facilitate the
integration of less-favored rural areas into international and national economies.
Fan and Zhang (2004) represented one of the most careful econometric analyses done on the topic. They
have used the reverse causality problem employing a dynamic GMM method. Using state-level data for 1970 to
1993, a simultaneous equation model has been developed to estimate the direct and indirect effects of different types
of government expenditure on productivity growth and rural poverty in India. According to their analysis,
investments in roads and irrigation significantly contribute to agricultural growth. At the same time, agricultural
growth shows a much larger demand effect on irrigation than on roads. This may be because irrigation is sector-
specified infrastructure and thus, the demand is more directly influenced by agricultural growth while the demand on
roads depends on several other factors along with agricultural growth (Fan and Zhang 2004).
Fan, Hazell, and Thorat (2000) also find that public investment in rural roads has an important positive
impact on agricultural productivity in India. Also, investments on roads significantly contribute to agricultural
growth as well as growth in the non-farm sector and the national economy (Fan, Zhang, and Zhang 2002 and Fan
and Chan-Kang 2005). The quality of rural infrastructure is an important determinant of the effects of infrastructure
on agricultural growth and poverty reduction (Fan and Chan-Kang 2005). Because Fan and Chan- Kang (2005)
didn't present the returns to agricultural GDP of investment in low-quality roads, therefore the returns to total GDP
is examined to match the consequences of the quality of roads. When measured by kilometers of new roads, they
found that investment in high-quality roads in China has close to 50% returns to total GDP than investment in low-
quality roads. However, investments in low-quality roads have the largest returns in total GDP (41.5%). In rural
areas, while the effects of high-quality roads were almost twice as high as those of low-quality roads in urban areas.
Besides, once the effects in money metric (i.e., taking the cost of construction into account) are examined, high-
quality roads have lower returns per year than low-quality roads in all areas and regions. This study have significant
policy implications. To reduce rural poverty, the Govt. of India should increase its spending on rural roads and
R&D. In these types of investments not only have a much larger poverty impact per rupee spent than any other
government investment but generate higher growth in productivity also.
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Mishra and Chand (1995) proposed that in the recent past have suggested that the decline in public sector
capital formation in Indian agriculture is not only worse in itself but it also results in a decline privately capital
formation because there exists a high complementarity between public and personal capital formation in agriculture.
This means if the declining trend of public sector capital formation is not, reversed, prospects of agricultural growth
in the country are dim. They took issue with these contentions and claims, in particular with the complementarity
hypothesis. It explains the behavior in public and private capital formation in agriculture during the post-green
revolution period in terms of its political economy, also examines the efficiency of capital use in agriculture in that
period. The authors further argued that the important question is not simply investment in agriculture but for
agriculture. To the extent possible (italics ours) analysis of change in stocks are prepared separately for the public
and private sectors [CSO 1989: p 231, Sec 21.6J. "The estimates of change in stocks, on the other hand, are prepared
only (italics ours) by the industry of use" (CSO 1989: p 235, Sec 21.20). CSO estimates of change in stocks in the
private sector in agriculture for the 1980s are underestimates. So, therefore, gross capital formation (GCF) in the
private sector of agriculture in the 1980s has been given less significance. This is because estimates of 'construction
of asset' in this sector are not based on up-to-date data on the benchmark survey provided by the RBI's, All India
Debt and Investment Survey, 1981 -82. Authors referred to earlier have sought to explain the behavior of private and
public sector capital formation especially during the 1980s, when not only public capital formation decreased but, on
their reckoning, private capital formation too either declined or remained 'sluggish' and 'muted'. For the declining
public, a rapid rise in the proportion of expenditure on revenue (current) account. Hanumantha Rao has emphasized
the fast growth of agricultural subsidies, an expenditure on current accounts during the 1980s.
In terms of private sector capital formation, Shetty has produced a labored explanation for its 'sluggishness'
during the 1980s. He has emphasized on the fast growth of term loans from financial institutions, and yet a lower
growth in rural debts a higher rate of repayment defaults, implying a rise in the non-capital formation uses of the
credit advances. The decrease during the 1980s in the broader context rather than accept the case based upon the
false premise of complementarity with private capital formation. Public investment in agriculture in the form of
infrastructure is continued to be important on its own for agricultural growth. Just as public investment in major and
minor irrigation systems is needed and desirable so is public investment in rural roads, power supply systems, input
delivery depots, and market yards, the former counted as an investment in agriculture and the latter for agriculture.
Singh (2014) suggested that analysis of investment series has confirmed deceleration in public investment
both at the national and state level after the 1980s6. The declining public investment in agriculture was a large
proportion of the resource flows to the agricultural sector going into current expenditure on subsidies for electricity,
irrigation, banking, credit and other agricultural inputs, investment. The rise of rural credit was arrested and the
informal sector again trapped the poor farmers. The economic reforms initiated in 1990 -91 emphasized on “set the
prices right” to stimulate the agriculture sector. Mishra and Chand (1995) proposed that in the recent past have
suggested that the decline in public sector capital formation in Indian agriculture is not only worse in itself but it
also results in a decline privately capital formation because there exists a high complementarity between public and
personal capital formation in agriculture.
Some economists has been said that public investment in agricultural field has decreased within the recent
years (Dantwala, 1986; Rath, 1989; Mishra and Chand, 1995; Shetty, 1990; Kumar, 1992; Mishra, 1996; Chand,
2000 and 2001; Gulati and Bathla, 2001; Roy and Pal, 2002; Chadha, 2003; Rao and Gulati, 2005). They stressed
the significance of public investment in infrastructure consisting of transport, storage, energy, etc. for the
development of the agriculture sector. As such investment “in” agriculture is less relevant than investment “for”
agriculture for the growth of the agriculture sector.
Presently, an intense conflicts has been going among agricultural economists of the country about the
trends in investment and the relationship between private and public investment in agriculture in the focus of the
declining trend in public investment in agriculture observed since the mid-eighties. Public investments in the
agricultural sector have played a vital role in promoting the growth of agricultural output because it includes
expenditures directed to agricultural infrastructure, research, and development, and education and training, etc. It has
Science, Technology and Development
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been observed that since the initiation of the 1980s gross capital formation in agriculture in the public sector started
coming down gradually and continued falling till the early 1990s.
The decreasing trend in public investment in agriculture in the decade of the 1980s as well as in the 1990s
was improved since 2000-01. Capital formation at the state level assumes dominance in the context of policymaking
and balanced regional development by economists. Public investment in agriculture is also the accountability of the
states, but many states have ignored their investments in infrastructure for agriculture. There are many rural
infrastructure projects, which have started but are remained as incomplete due to lack of resources. The overall
public expenditure on agriculture is dependent on the resources available to the states, which has decreased in all the
states over the years.
Bhathla (2014) suggested that the public and private capital formation in Indian agriculture has expanded
manifold during the post-reform period. But agricultural growth continues to however around 3%, raising concerns
about the future of agriculture. This study has found that private and public investments in agriculture are unevenly
spread across the states and so is the farm income. The states which have invested largely into irrigation and
infrastructure, and have pushed market-driven agro-industrial policies have accomplished higher rates of growth in
the private investment and also in farm income. A decrease in public GCFA is associated with a fall in the rate of
growth in private GCFA and output. Declination in the food grain output during the 1980s became a cause for
concern due to the well-founded linkages of public spending with agricultural growth and reduction in rural poverty
through the increase in productivity and employment and the fall in prices. The temporal analysis of trends in gross
capital formation in agriculture (GCFA) was from 1960-61 to 2007-08. However, disparities within the state-wise
magnitude of public and private GCFA, and trends inefficiency of investment were investigated from 1980- 81 to
1990-91 and then from 1999-2000 to 2005-06 due to non-availability of continuous estimates on the private GCFA,
followed by empirical analysis of inter-state differentials in public and private investments and their impact on the
agricultural income. The result is obtained using fixed and random effect models for separately for pre- and post -
reforms periods. An increase in the rate of growth in both public and private capital formation in agriculture during
the 2000s has not transpired into the desired growth and has become a cause of concern, given that public and
private investments and agricultural growth are positively inter-linked and have strong implications for public policy
on resource allocation and reduction in poverty. This study has analyzed this aspect at disaggregate of state level.
The results have broadly indicated that agriculturally-dominant relatively poor northern and central states of the
country have experienced rapid growth in agricultural investment that has positively affected income and decline in
rural poverty. Their development is a reflection of the effective public policy in favor of capital deepening in
agriculture and also in the organized food industry and it can be replicated in other states as well. Strong
interconnection identified between the agriculture and food processing industry also mandates improvements in
technology, irrigation, and rural infrastructure and better alliances between farmers and the food processing industry
for faster growth in agricultural performance. As part of fiscal reforms, major input subsidies were brought down
relative to the size of the agricultural economy.
The expansion of rural credit was arrested and the informal sector again trapped the poor farmers.
Throughout economic reform, agricultural growth rates slowed down. Most importantly, the rate of growth of the
production of food grain slowed down and fell behind the population growth rates for the first time after
independence. In India, agriculture continues to provide a livelihood for more than half of the population, pro
developed countries’ policies after 1991 had acute adverse effects. The self-sufficiency in food production after the
green revolution has been built with government support; like credit assistance, price supports and marketing
facilities, which led to the creation of a graticules (inter linkages) of institutional support structures in rural areas.
III. OBJECTIVES
To analyses the performance of rural infrastructure in India over decades and across the states.
To find out the relationship between rural infrastructure and agricultural productivity.
To analyses the relationship between capital formation and infrastructure allocation over decades and
across the states.
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Volume IX Issue II FEBRUARY 2020
ISSN : 0950-0707
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To analyses the rural investment both public and private in India associated with agriculture over
decades and across the states and to analyses the increasing importance of one kind of investment more
than the other.
IV. DATABASE
The data suitable for analyzing different aspects in this paper has been taken from different sources like, Ministry of Agriculture and Past Issues. Govt. of India (1951-2011); Ministry of Road and Transport and Highway and Past Issues. Govt. of India (1951-2011); Central Electricity Authority, Past Issues. Govt. of India (1951-2011); Ministry of Agriculture and Farmer Welfare, Govt. of India (1991, 2001, 2011); Ministry of Power, Govt. of India (1991, 2001, 2011); Ministry of Statics and Programme Implementation Govt. of India (1991, 2001, 2011); Planning Commission. Govt. of India; Directorate of Economic and Statistics. Govt. of India, (1991, 2001, 2011); Report on 20 th Finance Commission. Govt. of India; and Lok Sabha in India Unstirred Question No. 2243, Dated 27.03.2012.
V. METHODOLOGY
The methodologies used in analysis is as follows;
5.1 Composite index of rural infrastructure / infrastructure index:
The creation of an index is primarily an aggregation exercise, it represents combination of many variables. The
Centroid method has been used here by taking physical indicators of rural infrastructure. In this method the Z-score
values of each indicator is calculated and then their sum is taken.
CI=( Z-score of Gross irrigated area as % of total cropped area + Z-score of Road density +Z-score of
Consumption of electricity in rural sectors as % of total Supply )
5.2 Least Square Method:
For determining the relationship between composite index of indicators of rural infrastructure and agricultural
productivity, taking them x and y respectively the equation of trend line in calculated by the formulas-
Y=a+ b. x
a= (∑x) (∑x2)-(∑x) (∑x. y)/n∑x2-(∑x) 2
b= n∑ x. y-(∑x) (∑y)/n∑x2-(∑x) 2
5.3 Pearson Correlation Method (R):
For calculating the value of correlation coefficient to analyze the level of relationship between composite index of
indicators of rural infrastructure and agricultural productivity formula is applied-
R= ∑(x-mean of x) (y-mean of y)/ (∑(x-mean of x) 2 ∑(y- mean of y) 2) (1/2)
5.4 Matrix Table Method:
The ranks of states considering composite index of indicators of rural infrastructure and agricultural productivity are
placed in matrix table.
5.5 Normal Classification Method:
The classes are made by the formula as follows-
No. of classes= 1+3.322*log (no. of items)
Range= highest value- lowest value
Class interval= range/no. of classes.
Using above methods the following steps are done, like
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Volume IX Issue II FEBRUARY 2020
ISSN : 0950-0707
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Figure 1: Decade-wise change
Analysis in the change in the indicators (Road density, Gross irrigated area as % of total cropped area,
Consumption of electricity in rural sectors as % of total Supply) of rural infrastructure in India on temporal
scale(1951-2011).
Analysis in the change in the indicators (Road density, Gross irrigated area as % of total cropped area,
Consumption of electricity in rural sectors as % of total Supply ) of rural infrastructure in India on spatial
scale (across the states during liberalization and post liberalization period: 1991,2001 and 2011).
Examining the relationship between the composite index of physical indicators of rural infrastructure and
agricultural productivity in India on temporal scale.
Examining the relationship between the composite index of physical indicators of rural infrastructure and
agricultural productivity in India on spatial scale.
Finding out the relationship between capital formation in agriculture and composite index of rural
infrastructure in India on temporal scale.
Finding out the relationship between capital formation in agriculture and composite index of rural
infrastructure in India on spatial scale.
Analysis in the trend in public and private rural investment with reference to composite index of rural
infrastructure in India on temporal scale.
Analysis in the trend in public and private rural investment with reference to composite index of rural
infrastructure in India on spatial scale.
VI. RESULTS AND DISCUSSION
6.1 Decade wise performance of rural infrastructure in India
6.1.1 Gross irrigated area as % of Total Cropped Area:
It is an important indicator of rural infrastructure as agricultural production and productivity depend on it.
Insufficiency, uncertainty, and irregularity of rain cause uncertainty in agriculture. Even during monsoon season, the
rainfall is scanty and
undependable in many
parts of the country.
Sometimes the monsoon
delays considerably while
sometimes it ceases
prematurely. This pushes
large areas of India into
drought conditions.
With the help of
irrigation, labor,
agricultural land, droughts
and famines can be
effectively controlled.
Increase in Gross Irrigated
Area As % of Total
Cropped Area enhances
high productivity,
multiple cropping
systems, and effective implementation of HYV seeds, stabilizes the agricultural output and brings more area under
cultivation. It indirectly influences social factors like employment, development of the allied sector and security of
farmers. In India, the main irrigation sources are tanks, wells, and canals along with other sources. Presently about
31% of the irrigated areas in India are watered by canals. This includes large areas of land in Haryana, Uttar
Pradesh, Punjab, Bihar and the parts of southern Indian states. Wells are now cover large areas of Punjab, Uttar
Pradesh, Bihar, Rajasthan, and Tamil Nadu. While tanks are constructed for storing water in the rainy season which
is subsequently used for irrigation purposes.
But the availability of irrigation facilities is highly inadequate in India. For example, as shown in Fig: 1, In
1951 Gross Irrigated Area As % OF Total Cropped Area was 17.11%, in 1961 it increased to 18.32%, then it
increased with time and became 44.92% by 2011.
Science, Technology and Development
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Figure 2: Decades-wise change in road density
During the pre-green revolution and beginning of planning in India in 1950-51 irrigation schemes were divided into
three categories – Major, costing more than Rs 5 crore each; medium costing between Rs. 10 lakh Rs. five crore
each; and costing less than Rs 10 lakh each. A new classification was introduced in 1978 during the maturity of the
green revolution which told that major schemes having CCA (Culturable Command Area) between 2,000 hectares
and 10,000 hectares, and minor schemes having CCA of less than 200 hectares. A huge investment was made on
irrigation during the planning period from Rs. 455 crore in the 1st Plan, the expenditure on irrigation rose to Rs
36,649 crore in the 8th Plan. After liberalization in 1996-1997, a program called AIBP (Accelerated Irrigation
Benefit Programme was launched by the Govt. of India, under this program, the Centre assists by way of loans to the
states on matching basis for early completion of selected large irrigation systems and various multi-purpose projects.
National Agricultural Policy (2001) emphasized equal distribution of irrigation facilities which results in an increase
in Gross Irrigated Area as % of a total cropped area near to 50% in 2011 in India.
6.1.2 Road density:
Road density is the measure of the length of road in the unit area which denotes the level of connectivity of the area.
This is important as a rural infrastructure because this rural road density in the national road system of India is
enormous but, even though it typically accounts for more than half of their transport network. The road density of
India in km per 1000 sq. km was 121.67 in 1951, which has increased continuously and became 1422.83 in 2011.
Qualitatively it includes a mixture of modern highways and narrow, unpaved roads, and is being improved.
During the pre-green revolution and the beginning of planning in India (1950-51), the construction target of Nagpur
Plan has been achieved. In 1956 a Highways Act was passed and the second twenty-year plan proposed for the
period 1961-1981, with
the ambition of tripling
road density. In 1988the
National Highways
Authority in India was
established in India by an
Act of Parliament and
came into existence in
1989. The Act empowered
the entity to develop,
maintain and manage
India's road network.
However the Authority
was created in 1988, not
much happened till India
introduced widespread
economic liberalization in
the early 1990s. In 1995,
the authority has privatized
road network development in India. One of the most ambitious projects National Highways Development Project
(NHDP, Govt. of India; 1998) to improve roads. The total cost of that project is Rs.300 billion funded largely by the
government’s special petroleum product tax revenues and government borrowing. The rural roads in India form a
substantial portion of the Indian road network, constituting over 50% percent of the total roads. In the initial period
over 30 percent of Indian farmers' harvests spoil post-harvest because the poor infrastructure of rural roads is of poor
quality, potholed, and unable to withstand loads of heavy farm equipment. These roads are far from all-season, good
quality four lane or two lane highways, making logistical costs between different parts of India and the various break
of bulk and economic resource flow also. And the Pradhan Mantri Gram Sadak Yojana (2000) to development of
these rural roads, and provide a great connectivity to unconnected rural habitations. The scheme proposed that these
roads are going to be constructed and maintained by the village panchayats. The scheme proposed that these roads
are going to be constructed and maintained by the village panchayats.
In some parts of India, the Bharat Nirman Yojana has privatized the rural road construction projects and
deployed contractors. The effort has aimed to buildup India's rural and remote areas’ all-season, single lane, paved
asphalted roads. An important portion of the funding has come from the World Bank and the Asian Development
Bank. In 2011 The Economist noted the rural road scheme and Mahatma Gandhi National Rural Employment
Guarantee to be India's biggest single welfare project, costing over $8 billion per year. But the report criticizes
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Figure 3: decades-wise change in electricity availability
uneven, patchy
implementation of the
scheme. The
government scheme
has failed to improve
India's awful rural
infrastructures but it
tries to improve.
6.1.3 Consumption of
electricity in rural
sectors as % of total
Supply:
Expansion of
electrification and
electricity services
are vital to both the
economic and social
development of rural
sectors in India.
Transmission and
Distribution losses in India have risen from 25% in 1997-1998 to around 33% in 2003-2004.
The first plan only 1 in 200 villages were connected to grid supply across the country. The plan of rural
electrification (second plan) only eventually electrified 350 out of a total of 856. The third Plan for the 1st time
raised the issue of efficiency in the sector. The REC (Rural Electrification Corporation) was created in 1969 with a
renewed focus on poverty alleviation. In the plan of 4th and 5th was developed a target-based approach of rural
electrification (pump set energization, and village grid connectivity).
In the early ’80s saw major changes in conjunction with the creation of the Commission for Additional
Sources of Energy (CASE) in 1981, which developed into a full-fledged Ministry for Non-Conventional Energy
Sources (MNES) in 1992. The 6th and 7th Plan periods innovation of rural energy programs like the National
Program on Improved Chulha (NPIC) in (1983), The National Project on Biogas Development (1981-82), integrated
energy programs like IREP (Integrated Rural Energy Planning) and Urjagram and Special Program Agriculture
(SAP). With the decades of the 90s, rural energy provision now largely rests with the MNES and RECs. Covering a
good range of fuel options including renewable sources, technology. Some of Rural Electrification Schemes run by
GOI are like Pradhan Mantri Gramodaya Yojna (PMGY), Rural Electricity Supply Technology Mission (REST),
Accelerated Rural Electrification Program (AREP), Rajiv Gandhi Grameen Vidyutikaran Yojna. The total supplied
electricity available to agricultural purposes was 6.12% in 1951 which increased up to 1991 i.e. 28.2%. Then it
started decreasing in post-liberalization, as electricity was being used in non-agricultural sectors more. To stop this
decreasing trend, the National Agricultural Policy (2001) emphasized agricultural electrification. There have been
substantial investments in the agricultural electricity infrastructure of the country since the pre-green revolution.
These programs have emphasized infrastructure investments but not on management; on ambitious coverage targets
but not on financing or creating incentives for sustainable maintenance of infrastructure stock; on triage of
emergency measures and it further decreased in 2011 to 20.48%.
6.2 State wise performance of rural infrastructure in India:
This analysis includes state wise analysis of changing pattern of indicators of rural infrastructure during and post
liberalization period.
6.2.1 The configuration of 1991:
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In 1991, Gross Irrigated Area As % of Total Cropped Area was very high only in Punjab and high in Haryana. It is
mainly due to canal irrigation and the effective implementation of irrigation infrastructure. While it is very low in
MP, Goa, Maharashtra, Karnataka, and Kerala due to inefficient implementation of irrigation facility and more
emphasis over other sectors. Kerala and Goa have the
highest road density and TN has high density due to the
road and transport projects taken up by state government
and efficiency in national projects. While all the northern
states except Punjab have very low road density. Haryana
has consumed the highest electricity in rural sectors as %
of Total Supply. Then came Punjab and TN as the
emphasis on using electricity on irrigational purposes.
While the states in the west except Gujrat had very low %
of electricity consumed for agricultural purposes. Overall
in 1991 Punjab, Haryana had come up with the immense
level of growth in rural infrastructure, TN and Kerala were
also following them with high rural infrastructure, while
the northeastern states were lagging mainly due to
improper planning and implementation of investment in
developing rural infrastructure.
6.2.2 The configuration of 2001:
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In
2001, Gross Irrigated Area As % OF Total Cropped Area
was very high in Punjab and Haryana, they have
maintained their position as in 1991, high in UP while
very low in Chhattisgarh, Jharkhand, Maharashtra, and
Kerala. Like in 1991 Kerala had the highest road density
followed by TN and Odissa. While the rest of the states
remained in the same position as in 1991. After National
Agricultural Policy, putting more emphasis on rural
electrification Punjab, Haryana has maintained their
positions in very high electricity in rural sectors as % of
total Supply and UP, Karnataka and Andhra Pradesh have
joined them. The western and central states have
improved their positions. Overall in 2001, the states which
were with higher rural infrastructure in 1991 are still at
the top while other states have improved from their
previous positions, the northeastern states are still lagging.
6.2.3 The configuration of 2011:
In 2011, the picture is quite similar to in 2001 but Bihar
has come up with a higher Gross Irrigated Area As % OF
Total Cropped Area. It is mainly due to serious
consideration of irrigation as a rural infrastructure and
activity of various multipurpose projects.
In the case of road density Kerala is still at the top while WB and Assam have come up with high road density due
to various transport-related projects taken up by state government and proper planning and investment utilization.
The maximum states have come up with high electricity in rural sectors as % of Total Supply. Overall in 2011,
Punjab and Haryana are having very high rural infrastructure as in 1991 and 2001, now WB has joined them. The
northeastern states have started improving while Jharkhand is still at the bottom as in 2001, as this state has put more
emphasis on non-agricultural sectors.
From analyses 6.1 (decade wise performance of rural infrastructure in India) and 6.2 (State wise
performance of rural infrastructure in India), it is clear that over time the rural infrastructure has been changed
towards development. The indicators have changed over time, as a fig. 1 shows a more or less linear curve
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Figure 4: trend the relationship
Figure 5
representing an increase
in Gross irrigated area as
% of total cropped area
over decades. Fig. 2
shows the parabolic
curve showing an
increase in road density
over decades and fig. 3
shows an increase in
consumption of
electricity in rural sectors
as % of total Supply has
increased up to 1991
then decreases in 2001
AND 2011. State-wise it
also shows the highly
uneven distribution.
Punjab and Haryana have
been leading since 1991
and they continue to be
at the top in 2011 as well
but the northeastern
states have not been able
to develop rural
infrastructure properly
since 1991.
6.3 Relationship between composite index of rural infrastructure and agricultural productivity on decadal scale in
India:
Agricultural productivity is the measure the agricultural performance calculated through agricultural output in unit
agricultural input. To find the
relationship between composite index
of indicators of rural infrastructure and
agricultural productivity, scatter points
are plotted decade wise. This shows
productivity increases with the
increasing composite index of rural
infrastructure over time. The linear
trend line denotes that the increase is in
linear trend with tan-1(178.76)® slope
and intercept of 1022.2 kg/hectare. The
correlation coefficient of the composite
index of rural infrastructure and
agricultural productivity is 0.80, which
shows that they have a high positive
correlation. As the rural infrastructure
has developed over the period, the Road density, Gross irrigated area as % of total cropped area, Consumption of
electricity in rural sectors as % of total Supply have been increased which enhances high productivity by multiple
cropping system, stabilizes the agricultural output effective, implementation of HYV seeds and brings more area
under cultivation and their transportation and marketing. As during the pre-green revolution in 1951, the ci was -
3.63 while the productivity was423.48 kg/hectare. In the initial stage of the green revolution in 1961, it was-2.71
and662.33kg/hectare, which increases to -21.70 and 708.89 kg/hectare during the maturing stage of the green
revolution. From 1961 to 1981 it increases in more or less similar but the ci was still negative. From 1991 ci reached
in positive value after reforms and then it increased up to 3.46 in 2011. The state-wise analysis in the post-reform
period will add up further details.
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Table 2
6.4 Relationship between composite index of rural infrastructure and agricultural productivity state wise in India in
liberalization and post liberalization
period:
6.4.1 The configuration of 1991:
During the economic liberalization in
India, in 1991 there were few states with
positive composite index of rural
infrastructure. As shown in the matrix
table 2 only Punjab was there with very
high ci and very high productivity while
HP had very low ci of rural infrastructure
but very high productivity. It could be
possible due to the influence of financial
and social indicators other than these three
physical indicators. Maximum of the
states lied in the position with very low CI
and very low productivity, mainly the
north eastern states. As right
implementation of these three
indicators has not been done. The
scatter plot denotes that there has
been a positive linear relationship
between composite index of
indicators of rural infrastructure
and agricultural productivity
among the states. The correlation
coefficient was 0.15 which
denotes low positive correlation
among them. So in 1991 rural
infrastructure was not impacting
that much in Fig 6 and Table 2
showing relationship between
composite index of rural
infrastructure and agricultural
productivity in 1991.
6.4.2 The configuration of 2001:
In 2001, the highest and lowest values of both composite index rural infrastructure have decreased than in 1991 but
the highest and lowest values of
productivity have increased. This was
due to the financial indicators were
started impacting more than the physical
indicators from then. Overall
productivity was increasing over time
with an increase in CI of rural
infrastructure. Indian states were also
putting variation in this relationship. In
the matrix table 3, it is shown that
Haryana has joined with Punjab at the
position of very high CI and
productivity. HP has come down to high
productivity from very high. The
maximum of the states has come up
Figure 6
Figure 7
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Table 3
Table 4
Figure 8
to the position of the very
low composite index but
with low productivity.
Now more states are in
medium to very low CI
and high to very low
productivity. This was
mainly because of the
National Agricultural
Policy, 2000. The
correlation coefficient was
0.37 Fig 7. which denotes
a medium positive
correlation between CI of
rural infrastructure and
productivity among states
in 2001. So in 2001 rural
infrastructure was moderately impacting the agricultural performance in India, more than how it was in 1991. And
the table 3. Showing the relationship between composite index of rural infrastructure and agricultural productivity in
2001.
6.4.3 The configuration of 2011:
In 2011, the highest and lowest values of both composite index rural infrastructure have decreased than in 2001 but
the highest and lowest values of
productivity have increased. This was
due to the financial indicators were
started impacting more than the
physical indicators from then. Overall
productivity was increasing over time
with an increase in CI of rural
infrastructure. Indian states have
shown interesting variation in this
relationship. Haryana again went back
to the position of very high CI and
high productivity. Punjab was still
maintaining its position. Maximum
states were in position with very low
CI and low productivity as in 2001.
Now most of the lie in the
position with high to very
low CI and high to very
low productivity. The
correlation coefficient was
0.35 (Fig. 8) which
denotes a medium positive
correlation between CI of
rural infrastructure and
productivity among states
in 2011. So in 2011 rural
infrastructure was
moderately impacting the
agricultural performance in
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Figure 9
India, as to how it was in 2001. And the table 4. Showing the relationship between composite index of rural
infrastructure and agricultural productivity in 2011.
From analyses 6.3 (relationship between composite index of rural infrastructure and agricultural
productivity on decadal scale in India) and 6.4 (relationship between composite index of rural infrastructure and
agricultural productivity state wise in India in liberalization and post liberalization period) it is shown that the
distribution of rural infrastructure influences agricultural productivity. The gap in input use and agricultural
performance among the states, despite the quite similar agro-ecological potential, it relates to differences in policies
that encouraged much faster growth of input use in India. But while investments (both public and private) play a
central role in productivity growth, there was a considerable lag between investment in infrastructure and pre and
post-Green Revolution inputs and the realization of productivity growth. This is likely to be tolerant in part to
learning by doing and investment in human capital, which takes time to product development in technical efficiency;
and in part to the better utilization of lumpy capital investments over time.
6.5 Decade wise capital formation in agriculture (public and private) in relation with composite index of rural
infrastructure:
(Fig. 9) In 1951 when CI was -3.36, GCFA in public was 4.45% of GDP and in private was 4.02 % of GDP. In 1961
GCFA was quite similar to 1951 and CI increased to -2.71, in 1971 public GCFA started declining which suddenly
dropped in 1981 to 2.24 % of GDP while private GCFA increased to 5.12%. Then both in public and private GCFA
started falling but CI was increasing. In 2011 the private GCFA again raised to 1.48% of GDP while public GCFA
declined to 5.29% of GDP with high rural infrastructural CI of 3.46. So it can be said that with the allocation of rural
infrastructure capital formation is taking place and vice versa. Indian agriculture, which provides the livelihood for
more than half of the population, pro developed countries’, policies after 1991 had acute adverse effects. The self-
sufficiency in food
production after the
green revolution was
built with government
support; like credit
assistance, price
supports and marketing
facilities, which led to
the creation of a
network of institutional
support structures in
rural areas. The reform
process in India
significantly weakened
the structural support
through declining
public investment “for”
agriculture also as “in”
agriculture. As part of
fiscal reforms, major input subsidies were brought down to the size of the agricultural economy. Public capital
formation in agriculture continued to decline, and the growth of public expenditure on research and extension
slowed down. The extension of rural credit was arrested and the informal sector again trapped the poor farmers. The
new strategy of agricultural growth and diversification of agriculture make traditional crop cultivation to horticulture
etc. will require more investments on cold storage, rural roads, communication, marketing network and facilities,
warehouses, etc. Simultaneously efforts should be taken to revitalize agriculture through the introduction of
biotechnology and other innovations. This would require a substantial rise in investment in research & development
for agriculture.
6.6 State wise capital formation in agriculture in relation with composite index of indicators of rural infrastructure:
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Figure 10
Figure 11
(Fig. 10) Capital formation at the state level assumes importance in the context of policymaking and balanced
regional development by economists. Capital formation (public sector) in agriculture is also the accountability of the
states, but many states
have neglected
investment in
infrastructure for
agriculture. There are
many rural
infrastructure projects,
which have started but
are left incomplete for
want of resources. The
overall public
expenditure on
agriculture is dependent
on the resources
available to the states,
which has declined in
all the states over the
years. In 1991, fig
shows highest capital
formation in Andhra Pradesh but it had moderate rural infrastructure CI while Punjab having the highest CI is
having higher capital formation but not more than Andhra Pradesh. Haryana, Goa, and TN are also the same as
Punjab. In the case
of Karnataka,
Maharashtra,
Odisha in spite of
high capital
accumulation CI is
low, it can be they
were investing in
indicators other
than these three.
While most of the
northeastern states
were having low CI
as well as low
capital formation.
In 2001and 2011
the scenario is quite
similar as in 1991
except some of the
states which have
come up with higher capital formation with increasing CI like Bihar, Maharashtra (Fig. 11).
Analysis 6.5 (Decade wise capital formation in agriculture (public and private) in relation with composite index of
rural infrastructure) and 6.6 (State wise capital formation in agriculture in relation with composite index of
indicators of rural infrastructure) have explained that infrastructure allocation has formed capital formation in
agriculture in India. But it is not always true that richer states are getting more infrastructure than poorer states
considering these three indicators of rural infrastructure, may due to wrong and unplanned utilization of capital.
6.7 Decade wise analysis of rural investment and performance in rural infrastructure:
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(Fig. 12) As the composite index of rural infrastructure has increased over the decades, resulting in positive values
after liberalization reforms,
the agricultural investment
has also increased
simultaneously. The
investment includes both
public and private. Various
government initiatives taken
during planning periods under
various policies along with
financial institutions have
made this possible. However,
the economic reforms
initiated in 1990-91
emphasized on “set the prices
right” to stimulate the
agriculture sector. The
liberalization of the economy
was anticipated to result in
high investments and development in agricultural performance induced by favorable terms of trade. It was expected
that the gain in terms of trade would raise the investment in agriculture after the liberalization of the non-agriculture
sector will be more
significant than efficiency
gains flowing from the
liberalization of agricultural
trade and reduction of input
subsidies. The results,
however, did not
materialize. Agricultural
performance slackened and
investment in agriculture,
particularly on a public
account, declined. For
analyzing the concept of
becoming private investment
more important over public
investment further analysis
has been done sector-wise.
6.8 Decade wise analysis of rural investment (public and private) in rural infrastructure associated to agriculture:
(Fig. 13) Analysis of investment series has confirmed deceleration in public investment compared to the private both
at the national and state level after the 1980s. During the pre-green revolution period in 1951 both public and private
investment was almost equal and in 2011 private investment is almost three times the public investment. The
decrease in public investment in agriculture was mainly because of a large proportion of the resource flows to the
agriculture sector going into current expenditure on subsidies for credit and electricity, irrigation, other agricultural
inputs, rather than investment. The reform process in India simultaneously weakened the structural support through
declining public investment for agriculture as well as in agriculture. The rise of rural credits was arrested and the
informal sector again trapped the poor farmers. More significant distress condition of agriculture arrived after 1991.
The reversal of neoliberal policies in agriculture has become essential to revive the livelihood systems of rural India.
It might be due to the ‘crowding in’ effect of public investment in agriculture in India. The opposite phenomena of a
rising trend privately investment and a declining trend publicly investment in agriculture observed since the 1980s
have made the difficulty much debatable.
6.9 State wise analysis of investment (public and private) in rural infrastructure associated with agriculture:
Figure 12
Figure 13
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Figure 15
Figure 14
Figure 16
(Fig. 14, 15, 16 discussion respectively) In 1991, for all the states private investment was greater than public
investment. For MP and Gujarat,
Karnataka these were equal. For
Punjab and Rajasthan, private
investment is very high compared
to public investment. In 2001, after
the National Agricultural Policy
public investment has increased for
all the states. Maharashtra has faced
growth in both public and private
investment. Again in 2011 private
investment has started increasing
faster than public investment. It has
been noticed that there is a strong
complementarity between the public
and private capital formation. The
increase in private investment
has been materialized in terms
of the growing number of farm
holdings, increase in the flow
of institutional credit, and
diversification towards high-
value crops, coupled with an
increase in the demand for
processed food and favorable
terms of trade. Increased levels
of investment, complemented
with other factors seem to have
helped agriculture performance
a higher rate of growth in
many states. Credit acts as a
critical input in the production
process. Studies reveal that
loans from institutional
sources, viz. commercial banks, regional rural banks, and cooperatives provide access to and usage of irrigation,
fertilizers, seeds, and other
inputs, and are also highly
correlated with capital
formation. Nearly 86 % of the
farm investments in India are
undertaken through borrowed
money from both institutional
and non-institutional sources.
The farmers’ dependence on the
borrowed amount for
investment is more than 50
percent across all the states and
is relatively higher in the
developed states –more than 90
percent in Andhra Pradesh,
Kerala, Tamil Nadu, Punjab, Karnataka, Maharashtra, and Madhya Pradesh. Information was also evaluated to
assess how much of the total borrowings for such long term investments are through institutional sources. The
government spends on social and economic services/heads in the respective states. The public expenditure in India is
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mainly decentralized. The Central Government also spends directly on activities in rural areas, such as on
agricultural R&D and flagship programs. The Central Government gives most of its funds through the state
governments, which also contribute their respective shares and spend the final amount. Broad statistics for the 20
selected states reveal that during the period 1981-82 to 2013-14, the total real public expenditure (for all sectors)
increased from Rs. 110,800 crore in triennium-ending (TE) 1983-84 to Rs. 825,700 crore in TE 2013-14, at a growth
rate of 6.7%/year. The state-wise scenario about spending on agriculture-related rural infrastructure since 2000
shows high variations. The spending on agriculture-related rural infrastructure has not received much importance in
the less developed poorer states. The analysis (Paragraph no. 6.7, 6.8, 6.9) have explained that private investment in
rural infrastructure associated with agriculture is becoming more important than public investment over the years.
VII. CONCLUSION
From analyses 6.1 (decade wise performance of rural infrastructure in India) and 6.2 (state wise performance of rural
infrastructure in India), it is clear that over time the rural infrastructure has been changed towards development. The
indicators have changed over time in India. From analyses 6.3 (relationship between composite index of rural
infrastructure and agricultural productivity on decadal scale in India) and 6.4 (relationship between composite index
of rural infrastructure and agricultural productivity state wise in India in liberalization and post liberalization period)
it is shown that the distribution of rural infrastructure influences agricultural performance in India. The gap in input
use and agricultural performance among the states, despite the quite similar agro-ecological potential, likely to relate
to differences in policies that encouraged much faster growth of input in India. Analysis 6.5 (decade wise capital
formation in agriculture (public and private) in relation with composite index of rural infrastructure) and 6.6 (State
wise capital formation in agriculture in relation with composite index of indicators of rural infrastructure) have
explained that infrastructure allocation has formed capital formation in agriculture in India. But it is not always true
that richer states are getting more infrastructure than poorer states considering these three indicators of rural
infrastructure, may due to wrong and unplanned utilization of capital.
The analysis 6.7 (decade wise analysis of rural investment and performance in rural infrastructure), 6.8
(decade wise analysis of rural investment (public and private) in rural infrastructure associated to agriculture) and
6.9 (State wise analysis of investment (public and private) in rural infrastructure associated with agriculture) have
explained that private investment in rural infrastructure associated with agriculture is becoming more important than
public investment in me over the years. But while investment (both public and private) plays a central role in
productivity growth, there was a considerable lag between investment in infrastructure and pre and post-Green
Revolution inputs and productivity growth. This is tolerant in part to learning by doing and investment in human
capital, which takes time to product development in technical efficiency; and in part to the better utilization of
lumpy capital investments over time. Since agriculture is the major source of livelihood in rural India, the growth of
agricultural productivity is essential for improving the standard of living in India. The growth in agriculture is highly
dependent on the development of rural infrastructure which is dependent on private and public investment into it. In
Indian agriculture, which continues to provide a livelihood for more than half of the population, pro developed
countries’ policies after 1991 had acute adverse effects.
The self-sufficiency in food production after the green revolution was built with government support; like
credit assistance, price supports and marketing facilities, which led to the creation of a network of institutional
support structures in rural areas. The reform process in India significantly weakened the structural support through
declining public investment “for” agriculture also as “in” agriculture. As part of fiscal reforms, major input subsidies
were brought down to the size of the agricultural economy. Public capital formation in agriculture continued to
decline, and the growth of public expenditure on research and extension slowed down. The expansion of rural credit
was restricted and the informal sector again trapped the poor farmers. The new techniques of agricultural
diversification and performance from traditional crop cultivation would require more investments in marketing
network and facilities, communication, rural roads, cold storage, and warehouses, etc. Simultaneously efforts should
be made to revitalize agricultural performance through the introduction of biotechnology and other innovations. This
would require a substantial increase in investment in research & development in agriculture.
Science, Technology and Development
Volume IX Issue II FEBRUARY 2020
ISSN : 0950-0707
Page No : 150
ACKNOWLEDGEMENT
The author thanks the anonymous reviewer for constructive comments. Also thanks to Dr. Purva Yadav, Dr.
Sucharita Sen, Dr. D.N.Das, Dr. Milap Punia, Dr. Bhaswati Das, Dr. Sanjeev Sharma (CSRD, JNU), Dr. Nieuwaal
(Director Delta Alliance, The Netherlands) and Dr. Narendranath Guria for the theoretical and applied help of this
paper.
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2. Bathla. S, (2014), “Public and Private Capital Formation and Agricultural Growth in India: State Level
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3. Bhatia. M.S., (1999), “Rural Infrastructure and Growth in Agriculture”, Economic and Political Weekly,
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4. Chand. R, Mishra. S. N., (1995), “Public and Private Capital Formation in Indian Agriculture: Comments
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5. Fan. S, Hazell. P, Thorat. S, (2000), “Government Spending, Growth, Rural poverty in India”, American
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6. Malakar, K.D., (2019): Regional Studies: Some thinkable subjective discussion, LAP Lambert Academic
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7. Singh. P (2014), “Declining Public Investment in Indian Agriculture after Economic Reforms: An Interstate
analysis”, Journal of Management & Public Policy, Vol. 6, No. 1.
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