New method for farm data computation in the offing

Dissatisfied with the method used by the Central Statistical Organisation (CSO) for computing investment and capital formation data for the agriculture sector, the agriculture ministry has begun an exercise in working out a new methodology for this purpose.

This follows a probe by an experts committee headed by Institute of Economic Growth Director BB Bhattacharya. The committee had recommended different norms for compiling investment and capital formation numbers.

The national accounts numbers issued by the CSO in its present format gives the impression that the public sector investment in agriculture has been decelerating over the years. The private investment, on the other hand, had been on the rise.

However, the agriculture ministry feels that this perception is not wholly tenable. However, it concedes that the farm sector's share in the total public investment has been declining perceptibly.

The ministry contends that the downtrend in public investment in agriculture that began in 1980-81 has been reversed in past few years.

The ministry points out that the gross capital formation (GCF) in agriculture at constant prices (1993-94 prices) on account of public investment has risen from Rs 3,870 crore in 1998-99 to Rs 4,794 crore in 2001-02. The private investment rose during the same period from Rs 11,025 crore to Rs 13,263 crore.

The recent steps taken to increase funds for the accelerated irrigation development and watershed development schemes and lowering of interest rates on farm loans will facilitate further increase in public as well as private investment in this sector.

However, the share of the public sector in the gross capital formation in agriculture has been declining ever since 1960-61, though it showed some improvement in 2001-02.

It fell from 46.4 per cent in 1960-61 to a meagre 23.5 per cent in 2000-01. In 2001-02, however, it spurted for the first time to 26.5 per cent.

The sources also point out that the private sector investment is almost totally by individual farmers. The share of the private corporate sector has been negligible.

In the case of the public sector investment, the present procedure for compiling figures reflects primarily the investment on irrigation expansion alone.

Several other components of this investment, such as investment on development of rural infrastructure, conservation of natural resources, development of desert prone areas and the like, are not included in the overall agricultural investment numbers.

According to the UN norms for computing national accounts, which are followed by the CSO as well, the public sector investment in agriculture consists mainly (more than 95 per cent) of the expenditure on irrigation works.

The expenditure on soil conservation, incurred from the state exchequer, is shown as capital formation in the public administration sector.

Similarly, the government expenditure on the construction of rural roads, rural electrification, godowns and other infrastructure meant for developing agriculture is not included as capital expenditure under the farm sector. Nor is, of course, the investment in research and development.

The Bhattacharya committee has, in its report, outlined a different set of criteria for assessing public sector investment and capital formation.

It has suggested that, besides investment on infrastructure development, the government expenditure on agricultural research and education should also be counted as capital formation.

The new methodology will reflect the actual efforts made by the government in stepping up capital formation in agriculture, the ministry sources assert.

Based on the report of this committee, the agriculture ministry is now engaged in working out an alternative series for computing these numbers. This is being done in consultation with the CSO and other concerned departments and agencies.