Rural Infrastructure and its Impact on Agricultural ...journalstd.com/gallery/22-feb2020.pdf ·...

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.

Science, Technology and Development

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



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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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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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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.



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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.




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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.


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:


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.


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.


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.



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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.

VIII. REFERENCES

1. Andersen. P. P, Shimokawa. S., (2006), “Rural Infrastructure and Agricultural Development”, Annual Bank

Conference on Development Economics, Tokyo, Japan, pp. 29-30.

2. Bathla. S, (2014), “Public and Private Capital Formation and Agricultural Growth in India: State Level

Analysis of Inter-linkages during Pre- and Post-reform Periods”, Agricultural Economics Research Review,

Vol. 27, No.1.

3. Bhatia. M.S., (1999), “Rural Infrastructure and Growth in Agriculture”, Economic and Political Weekly,

Vol. 34, No.13,

4. Chand. R, Mishra. S. N., (1995), “Public and Private Capital Formation in Indian Agriculture: Comments

on Complementarity Hypothesis and Others”, Economic and Political Weekly, Vol. 30, No. 25.

5. Fan. S, Hazell. P, Thorat. S, (2000), “Government Spending, Growth, Rural poverty in India”, American

Journal of Agricultural Economics”, Vol. 82, No. 4.

6. Malakar, K.D., (2019): Regional Studies: Some thinkable subjective discussion, LAP Lambert Academic

Publishing, Germany. ISBN: 978-620-0-24914-2.

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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