Misplaced Priorities and Lopsided Investments: A Macroscan of Agriculture, Livestock and Fisheries Sectors in India

Abstract

This paper captures the performance of the agriculture, livestock and fisheries sub-sectors in terms of capital formation, incremental capital output ratio and relative contribution of these sub-sectors to gross domestic product during the period 2004-05 to 2010-11. The Gross Fixed Capital Formation (GFCF) in fisheries took off at around 6 per cent in 1990, peaked at around 16 per cent in 1999 and has been hovering around 10 per cent for the past 5-6 years. But, the GFCF in agriculture turned positive after 1999, and reached a maximum of 5 per cent, while GFCF in livestock, turned positive only in the X th Plan period and still remains below the 5 per cent mark. The investment elasticity of growth (IEG) in agriculture has been found fluctuating during 1981-2011, while that of the livestock and fisheries sub-sectors has been found improving. In all the three sub-sectors, when the investment elasticity is higher, the Incremental Capital Output Ratio (ICOR) is lower and vice-a-versa. The investment efficiency ratio (IER) has been found increasing in agriculture and fisheries, and reducing in the livestock sub-sector. Despite the fact that agriculture is the largest private investment sector in India, the investment elasticity is low and the ICOR is high, indicating the need for a relook at the composition and direction of investment in agriculture and livestock sub-sectors. The estimates of IEG in the fisheries have been found positive but, the ICOR is declining, indicating an increased output resulting from the increasing capital formation. The cointegration analysis has revealed a long-run equilibrium of time series with a common ground in the values of agriculture, livestock and fisheries GDP and GFCF. The ICOR in livestock has been found declining, indicating an excess capacity of capital in this sub-sector despite the fact that the IER has been marginally positive. The excess capacity could also arise because of misdirected investments in areas within the livestock sub-sector. Some broad leads have been derived from the results.

Performance and Perspective Analysis of Indian Shrimp Exports

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Capital formation in fisheries sector in India: trends, compositional changes and potential implications for sustainable development

“…The investment elasticity of growth shows responsiveness of GDP to changes in investment (Qureshi et al 2015). In this paper, the elasticity has been estimated for agricultural sector as a whole, and separately for fisheries sub-sector:…”

Impact of agricultural sector investment development on national economic output

“…Overcapacity can also arise due to misdirected investment in the livestock sub-sector in some parts of India. (Qureshi et al, 2015) In Vietnam, investment in the agricultural sector increased rapidly by more than 10% in the period 2000 to 2017, unfortunately the ICOR of agriculture in the period 2000 to 2017 increased from 2.09 in 2000 to 6.4 in 2009 and then fell to 4.49 in 2017 This reflects the efficiency of the use of capital in the agricultural sector to decline. In the period 2000-2005, the average ICOR was at 2.1 to 1, meaning that Vietnam needs to invest 2.1 capital to obtain 1 capital for agricultural growth.…”