Capital Formation in Indian Agriculture

A time series of capital formation in agriculture in Uttar Pradesh have been prepared for the first time, using secondary data to analyze trends in private and public investment in agriculture in Uttar Pradesh since 1980. The state had witnessed decelerated agricultural growth in the post-reform. This study has particularly focused on the identification of major determinants of private investment in agriculture in India as well as in the state of Uttar Pradesh which contributes a significant part of the agricultural output of the country. Impact of various factors as –public investment, Institutional finance, and favourable terms of trade, etc. on private investment in agriculture have been analysed by statistical techniques, e.g. correlation and multiple regression analysis. Complementarity between public and private investment in agriculture also have been examined statistically. The statistical analysis by co-integration, regression and error correction model estimation for long term and short term relationships supported the theory of ‘crowding in’ as public investment affects positively though insignificantly private investment in agriculture in the context of India and positively and significantly in the context of Uttar Pradesh. The study is thus expected to make a significant contribution for both improving theoretical understanding and policy formulation in an important area of the economy at the national and the state level