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Currently, public expenditure on research and extension together stands at well below one per cent of GDP in agriculture.

G. Srinivasan

New Delhi, Aug. 13 Notwithstanding the high concern over reversing the decline in agricultural investment, credit and irrigation by the authorities in recent years, public expenditure on farm research and extension services as a share of agricultural output has logged a much slower growth in real terms since 1990.

This is one of the important findings of a new study on ‘Agricultural growth in India since 1991’ brought out by the Department of Economic Analysis and Policy, Reserve Bank of India.

Currently, public expenditure on research and extension together stands at well below one per cent of GDP in agriculture. Though it has risen somewhat steadily over the past four decades, the post-2000 figure is above trend largely due to the slowing of output growth. At less than one per cent it is well below global standards, while the figure for research expenditure as share of GDP for the agricultural sector was 2.39 for the developed countries in 1991.

The authors of the study of the Development Research Group (DRG) of the apex bank, Mr Pulapre Balakrishnan, Mr Ramesh Golait and Mr Pankaj Kumar said for almost two decades this figure has hovered around 0.5 per cent or less. “The shrinkage is occurring at a time of turbulence in the policy environment and a developing fragility of the bio-physical, when the need for publicly-provided support services to production is greater,” they said, adding that this compounds the “issues of governing the national innovation system for India’s agriculture”.

Stating that a persistent trend in Indian agriculture is the shrinking farm size, the study said that as the smaller farms have come to predominate due to the fixity of land, they have come to account for the greater part of the area operated. Thus, while in 1960-61 over 60 per cent of the cultivated area was operated by farms exceeding four hectares by 2002-03 this figure is less than 35 per cent. Though this has gone unrecognised, the study avers that this may well be one of the factors that underlie the much-hyped finding from the National Sample Survey that close to 40 per cent of Indian farmers report that farming are not profitable.

The evidence on shrinking farm size point to two inescapable conclusions, it said. First, smaller holding-size makes it more difficult for the majority of Indian farms to access new technology and adopt more efficient forms of farm production organisation as their capacity to leverage credit is reduced. While these are relatively less capital intensive initiatives, their payoff could be substantial in relation to the investment. The slower growth of yield since 1991 may, at least to an extent, is related to this aspect, it said. Second, an improvement of farm relative-prices could do little to stem agricultural decline when structural factors governing production, such as farm size, turn adverse irreversibly.

Another problem plaguing the farm sector, the study said, pertains to the emerging environmental stress and two aspects of this are loss of soil nutrients and declining water availability. This contributes directly to potential yield loss that could be precluded if at all only via grater expenditure which heightens cost of production. But smaller farms strapped for credit could not handle this ecological decline by themselves. This is one identifiable consequence of shrinking farm size.

The study warns that “a diminishing economic base and gathering ecological stress constitute a pincer movement that impinges upon the future of agriculture” which needs to be addressed directly. While the developing environmental stress has received some attention, possible responses to the result of shrinking farm size have received much less, the study said. Hence it said economic policy must turn to encouraging an active lease market, while extant legislation, dating back to the original land reform, might be a hindrance to this. In some states tenancy is not officially recognised and this could hold back output expansion, the study cautioned.

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