Investment in land and water: India's experience - Hemendra Kumar

Hemendra Kumar, Special Secretary
Ministry of Agriculture, India

INTRODUCTION

India continues to be a predominantly agrarian economy with the majority of its population depending on agriculture for livelihood. The agriculture sector contributes about one - fourth share in GDP. Population growth and fragmentation of limited agricultural land on the one hand and limitations to increasing productivity through traditional methods of cultivation on the other, posed a severe constraint to agricultural growth in India's first decade of independence. The Green Revolution brought in by introducing high yielding varieties and systematically developing irrigation led to a breakthrough in raising productivity to meet the food demands of the increasing population. Per capita availability of food grains improved from 395 grams per day in 1951 to 459 grams per day in 1999 (Agricultural Statistics, 2001). But the challenge of maintaining the momentum in growth of food production keeping pace with population growth and making agriculture a viable source of income generation in the wake of globalization of the economy continues to receive serious attention of all concerned with agriculture. Ensuring accessibility of food to all citizens is another dimension of the challenge to be tackled simultaneously by augmenting avenues of employment, especially in rural areas.

Agriculture being the major occupation in rural areas, available land must be optimally utilised to increase production and provide livelihood to the people. Agricultural land consists of cultivated areas, fallow land, cultivable wasteland and land under miscellaneous trees has remained at 184 million ha for several years. The net planted area expanded from 118 million ha in 1950 - 1951 to 142 million ha in 1997 - 1998 by bringing more land under cultivation. Yet some 24 million ha of cultivable land are kept fallow year after year due to delayed and insufficient rainfall or due to lack of resources for cultivation (Land Use Statistics, 2001). Thus, there is scope for increasing net planted area to increase production and create additional employment.

Net irrigated area has increased from 21 million ha in 1950 - 51 to 55 million ha in 1997 - 1998 and gross irrigated area grew from 23 million ha to 73 million ha. Cropping intensity was 133 percent. Gross cropped area increased from 132 million ha in 1950 - 1951 to 191 million ha in 1997 - 1998. Overall cropping intensity with reference to 142 ha of net sown area is 134 percent and is almost the same as the cropping intensity of the irrigated area. This is contrary to the expectation that multiple cropping would be more prevalent in irrigated areas.

India's population crossed the billion mark at the turn of the millennium, rising from 361 million in 1950 - 1951. Population growth picked up momentum at the dawn of independence due to reduced mortality rates owing to better health facilities and improved living conditions. Consequently, cultivated land became more fragmented and the average size of an operational holding declined to 1.57 ha in 1990 - 1991 (Agricultural Statistics, 2001). This trend will lead to operationally inconvenient land parcels unless the proportion of the agricultural work force also decreases in accord with reduced share of agriculture in GDP, as expected in a developing economy. According to census data, the proportion of agricultural workers in the total work force declined from 69 percent in 1951 to 59 percent in 1991.

Net Value Added (NVA) is the value of output less intermediate consumption and depreciation. Agricultural per - worker NVA has risen from Rs. 566 (US$12) per annum in 1951 to Rs. 12 423 (US$264)^[2] in 1991. The corresponding increase in the non - agricultural sector is from Rs. 975 (US$21) to Rs. 32 287 (US$686) during the same period (Annex I) (National Accounts Statistics, 2001; National Accounts Statistics - Back Series). Apart from disparity in earnings between agricultural and non - agricultural workers, agricultural labourers get a smaller share of NVA as wages, which further reduces per capita income. As agricultural labourers are also observed to have more dependants to feed, poverty and food insecurity are often more pronounced in the case of rural labourers.

Food production in India is greatly influenced by the vagaries of monsoon and other weather conditions. About two - thirds of cultivated land depends on rain for water, and annual fluctuations are extreme. Considerable investment in agriculture and rural infrastructure is required to offset fluctuations in production due to aberrant weather conditions and to ensure achieving the target level of growth in production. Assured irrigation is a key factor in bringing about stability in production. Thus, investment in water in the form of implementing major, medium and minor irrigation projects, and development of watersheds in rainfed areas assumes primary importance in agricultural investment. Apart from increasing productivity and production, these investments help in providing employment to the rural population and increase their income.

INVESTMENT IN LAND AND WATER

Investment leads to capital formation consisting of additions to fixed assets and increases in stocks of inventories. Additions to fixed assets (also called fixed capital formation) are assets produced as outputs from production processes that are themselves used repeatedly or continuously in other production processes for more than one year. Accordingly, land is not a fixed capital asset because it is not an output of a production process. Improvements made to non - produced assets such as land and costs associated with transfer of landownership are also taken as fixed capital formation. Another component of capital formation, a change in inventory stock, is change in the inventory of intermediate goods, finished goods and semi - finished goods held by an enterprise. Fixed capital formation and changes in stock constitute Gross Capital Formation (GCF).

The National Accounts Statistics is India's central source for information on capital formation. Capital formation in private sector agriculture includes minor irrigation work, construction of bunds and farmhouses, machinery and equipment acquisition, increments to livestock, and development of orchards and plantations. Public sector investment in agriculture is predominantly in irrigation projects. Capital formation in land reclamation, soil conservation, afforestation and watershed development are undertaken by the public sector, and constitutes about 20 percent of public investment. Such items are shown in National Accounts as capital formation in public administration, and are not included under agriculture according to accounting procedure (Sources and Methods, 1989). Public sector investment in developing rural infrastructure, e.g. building rural roads, rural electrification, agricultural markets, storage facilities, education, training and extension work, also induces private investment in agriculture. Such investments provide employment to the rural population to earn their livelihood during the off - season. Though these expenditures are predominantly meant for agricultural development and progress increasingly over the years, they are not included as capital formation in the agriculture sector in the National Accounts. To get a clear picture of agricultural investment, a committee is identifying all investment components, which assist capital formation in agriculture. However, the trend in agricultural capital formation according to the national accounting procedure in the past is as follows.

The GCF in agriculture rose from Rs. 52.58 billion (US$1.119 billion) in 1960 - 1961 to Rs.213.88 billion (US$4.551 billion) in 1999 - 2000 at 1993 - 1994 prices. The share of agriculture in the overall GCF of the economy decreased from 21 percent in 1951 - 1952 to 8 percent in 1999 - 2000 (Table 2). In comparison with the agricultural share of about 25 percent in the GDP, its share of 8 percent in GCF is disproportionate (National Account Statistics, 2001; National Account Statistics - Back Series).

TABLE 1 Gross capital formation in agriculture at 1993 - 1994 prices

The private sector has a major share in agricultural investment as indicated in Table 1. The public sector contributed almost half of the investment in the initial decades of independence because of major irrigation development activities undertaken by the government. Since 1981, the public sector share has declined significantly. The contribution of the private sector keeps increasing to offset the decline in the contribution of the public sector. However, the necessity for increasing public investment in irrigation and infrastructure development has been emphasized in the National Agricultural Policy and the approach to the Tenth Five - Year Plan.

DEVELOPMENT OF IRRIGATION

Government's role as regards irrigation is to provide common facilities for the community. In direct agricultural investment, its main activity is creation of irrigation facilities. The multi - purpose hydrological projects executed in the initial decades of independence made possible the use of large - scale irrigation by farmers. Table 3 indicates changes irrigation since independence.

TABLE 2

Agricultural gross capital formation in 1993 - 1994 prices, terminal years of plan periods

* Figures for 1999 - 2000

TABLE 3

Net area irrigated according to source (thousand ha)

n.a. = not available

Area irrigation by canal has steadily increased from 7 million ha in 1950 - 1951 to 17 million ha in 1997 - 1998. Irrigated area through tanks, tubewells and other wells, which are the sources of minor irrigation, increased from 13 million ha to 37 million ha. The share of minor irrigation in the net irrigated area is 70 percent. Areas irrigated by tubewells and other wells have increased remarkably in the minor irrigation sector. There is still an ample scope for increasing the use of tank and other sources of irrigation by developing watersheds. As already indicated, cropping intensity in irrigated areas and unirrigated areas remains almost the same. A possible reason is that water from irrigation sources is not available in all seasons for multiple cropping in most irrigated areas.

Investment in irrigation shows itself as capital formation in construction. While investment by government and individual farmers is covered in capital formation estimates in National Accounts, capital formation due to watershed development by non - governmental organizations (NGOs) and private agencies is likely to be omitted.

SOIL CONSERVATION

Land degradation takes place due to water erosion, wind erosion, ravine formation, waterlogging, shifting cultivation, forest degradation and other special problems. According to a survey conducted by the Indian Council of Agricultural Research (ICAR) 174 million ha of India's total 329 million ha are affected by land degradation. Water erosion is observed to be the major cause of land degradation. Government is implementing varied soil conservation schemes. It also helps to develop watersheds. The important schemes are described in the following paragraphs.

PROGRAMMES AND EXPENDITURES ON IRRIGATION AND SOIL CONSERVATION

Major, medium and minor projects

Government has undertaken various major, medium and minor irrigation projects, command area development and flood control measures during various plan periods. Expenditures incurred in these projects, including external aid received from donors such as the World Bank, EEC, JBIC - Japan, KfW - Germany, France and the Netherlands, are given in Box 1. External assistance received since 1997 - 1998 was Rs.7.46 billion (US$159 million) in 1997 - 1998; Rs.7.09 billion (US$151 million) in 1998 - 1999; and Rs.6.23 billion (US$133 million) in 1999 - 2000.

Sporadic studies in different parts of India conducted to assess agro - economic impacts and employment potential created with reference to particular projects reveal significant employment growth in the target areas. It was found that more labour was employed in irrigated areas as compared to unirrigated areas. The ratio of cultivators to labourers tilted in favour of labourers. The wage rate was found to be higher in the command areas as compared to unirrigated areas.

Most expenditures on major, medium and minor irrigation projects are spent on creation of capital formation in the form of construction. These expenditures are closer to capital formation figures due to public sector given by the National Accounts and as such they directly contribute to increase in capital formation in agriculture.

Land improvement and watershed development in rainfed areas

There is no denying the fact that green revolution of the 1960s has centred mainly on irrigated areas, and yield gaps between irrigated and rainfed areas are quite substantial. But evidence indicates that HYV technologies have been adopted even by farmers in rainfed areas, particularly where there is assured rainfall and the occurrence of floods and droughts are minimal. Nevertheless, the yield response to technology adoption in rainfed areas is much less, as compared to that in irrigated areas. Also, the yield variability is relatively higher. In fact due to low and uncertain yield response to new technology as well as low capital absorption capacity, rainfed areas have lagged behind in terms of both technology adoption and productivity growth. As a result, the rainfed areas are associated with higher incidence of poverty. However, the facts that there is a limit beyond which irrigation potential cannot be increased and that irrigated areas have already reached a plateau in the adoption of available new technology, do compel us to look for alternative sources of agricultural growth, particularly in rainfed areas. In fact, India will have to increasingly harness the potentials of rainfed agriculture for ensuring the food and nutritional security of its growing population. Although the present food supply situation looks sustainable, the growing demand for foodgrains due both to population growth and rising income of the poor may compel us to look for alternative sources and areas of food production.

BOX 1

Major, medium, minor irrigation projects; command area development and flood control

India's irrigation potential was estimated at 93 million ha for 1997 - 1998, of which 73 million ha of gross cropped area was already utilised. However, only 55 million ha of net sown area of the total 142 million ha are currently irrigated. For small irrigation projects, the average cost per hectare of irrigation potential created has risen sharply from Rs. 566 (US$12) in the First Five - Year Plan to Rs. 10 051 (US$214) in the Eighth Plan. The corresponding increase for large/medium projects was from Rs.1 200 (US$26) to Rs. 98 495 (US$2 096). This acts as a constraint to further augmentation of irrigation potential. In fact, all major irrigation projects are heavily subsidized. Their water use efficiency is also very low because of low water rates, poor management and the inability to undertake further necessary investments to improve water use efficiency. In view of this, the watershed development approach seems to hold promise to irrigate rainfed land and provide other economic and ecological benefits.

A watershed is generally defined as a geohydrological unit or land area, the runoff of which flows in defined surface drains or streams to a common drain point. The watershed approach to development recognizes the interrelationships between soil and water and between upstream and downstream areas in development of water harvesting and conservation, appropriate land use, vegetative cover and other potentials of natural endowments to promote the socio-economic welfare of the people. All the while, ecological balance and sustainability is maintained.

Several governmental agencies, NGOs and external agencies promote watershed development projects in various rainfed areas. There are at least 13 major government programmes watershed and soil conservation development (see Table 2 on areas covered and budgets) including six operated by the Ministry of Agriculture:

• National Watershed Development Project for Rainfed Areas (NWDPRA);
• Soil Conservation in Catchments of River Valley Projects (RVP);
• Soil Conservation in Catchments of Flood - prone Rivers (FPR);
• Reclamation of Alkali Soils;
• Alkali Land Reclamation and Development Project with EEC assistance; and the
• Watershed Development Project in Shifting Cultivation Areas (WDPSCA)

The Ministry of Rural Development operates three programmes: the Drought Prone Area Programme (DPAP), the Desert Development Programme (DDP), and the Integrated Wastelands Development Programme (IWDP).

The Ministry of Forests and Environment has two programmes: Integrated Afforestation and Ecodevelopment Schemes (IAES) and the Area Oriented Fuelwood and Fodder Project Scheme, while the Planning Commission operates two programmes itself: the Hill Area Development Programme and the Western Ghats Development Programme.

State governments implement many programmes for watershed development and soil conservation. There are a number of externally aided projects assisted by the World Bank, EEC, KfW, DANIDA, SDC and ODA. Nearly 300 NGOs are engaged in environmental work, including watershed development. Funds are also provided by the National Bank for Agriculture and Rural Development, commercial banks and cooperative societies for developing watersheds.

National Watershed Development Project for Rainfed Areas (NWDPRA)

The National Watershed Development Project for Rainfed Areas (NWDPRA) was launched during the Eighth Plan (1992 - 1997) in 25 states and two Union Territories and continued to be implemented during the Ninth Plan (1997 - 2002). During the Ninth Plan, it is proposed to treat an area of 2.30 million ha. The broad development objectives are (i) enhancement of agricultural productivity in a sustainable manner, (ii) restoration of ecological balance in the degraded and fragile rainfed ecosystems by greening these areas through appropriate mix of trees, shrubs and grasses, (iii) reduction in regional disparity between irrigated and rainfed areas and (iv) creation of sustained employment opportunities for the rural poor. Impact evaluation studies both on the ground and through remote sensing techniques have shown that watershed based interventions have led to increases in groundwater recharge, increase in number of wells and water bodies, enhancement of cropping intensity, changes in cropping pattern, higher yields of crops and reduction in soil losses.

Agro - economic research centres in the ministry of agriculture and other agencies in each state where the project is being implemented did detailed impact evaluation studies. They revealed that the project substantially helped increase productivity and provided additional employment to the local people (Compendium).

Soil Conservation in Catchments of River Valley Project (RVP)

Soil conservation in this programme commenced in 1961/1962 during the Third Five - Year Plan. The target catchment area is 71.2 million ha and total treatable area is 17.7 million ha implemented in Andhra Pradesh, Assam, Bihar, Gujarat, H.P., Jammu and Kashmir, Karnataka, Kerala, Maharashtra, Punjab, Orissa, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttar Pradesh and West Bengal. The main project objectives are: (i) enhancement of productivity of degraded land; (ii) prevention of soil loss from catchment areas (iii) improvement of land capability and moisture regime; (iv) creation of awareness for catchment core; and (v) optimization of resources for socio-economic upliftment.

Soil Conservation in Catchments of Flood - prone Rivers (FPR)

Beginning in the Sixth Five - Year Plan (1980 - 1985), the total extent of catchment area covered is 20.0 million ha and the treatable area is 7.4 million ha. The scheme is being implemented in Bihar, Haryana, Himachal Pradesh, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh and West Bengal. Its main objectives are (i) reduction of runoff from the catchment to reduce peak flow, (ii) prevention of soil loss from watersheds, (iii) improving land capability and moisture regimes, (iv) creation of awareness for catchment cores and (v) optimization of resources for socio-economic upliftment.

Reclamation of Alkali Soils

Beginning in 1985 - 1986, this programme has been implemented in Gujarat, Rajasthan, Madhya Pradesh, Haryana, Punjab and Uttar Pradesh where there are alkali soils estimated at 3.6 million ha. Its objectives are to (i) reclaim alkali lands for increasing crop production, (ii) improve land productivity, (iii) raise horticulture production, (iv) increase production of fuelwood and fodder species and (v) to generate employment opportunities in rural areas.

Alkali Land Reclamation and Development with EEC assistance

Commencing in 1993 - 1994, ALRD is being implemented in Bihar and Uttar Pradesh to improve the incomes of disadvantaged and marginal farmers by reclaiming potentially fertile alkali land.

Watershed Development Shifting Cultivation Areas (WDPSCA)

From 1994 - 1995 WDPSCA began work in a 2.3 - million ha area in nine states of which the northeastern states account for 2.0 million ha. The scheme is implemented in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. Its objectives are to: (i) protect the hill slopes of jhum areas and to reduce further land degradation, (ii) settle jhumia families by providing developed productive land and improved cultivation packages, (iii) improve the socio-economic status of ethnic minority (tribal) families and (iv) reduce the jhum cycle for mitigation of the ill effects of shifting cultivation and to preserve the eco - environment.

Integrated Wastelands Development Programme (IWDP)

Under implementation since 1989 - 1990, this scheme seeks to develop non - forest wastelands through the holistic development of watersheds. It aims at checking land degradation, putting wastelands to sustainable use and increasing bio - mass availability - especially fuel wood and fodder. The scheme strives to increase rural employment and to ensure people’s participation in wastelands development at all stages. Major activities include soil and moisture conservation measures, plantation, agro - forestry, horticulture, training and awareness campaigns.

Drought Prone Area Programme (DPAP)

A large scale government initiative, the Drought Prone Areas Programme (DPAP) was launched in 1973 - 1974 to deal with the special problems faced by fragile areas continuously affected by severe drought. The responsibility of planning, executing and maintaining their watershed projects is entrusted to local peoples’ organizations formed for the purpose.

The basic objective of the programme is to minimise the adverse effects of drought on crop and livestock production, land productivity, water and human resources thereby ultimately leading to the drought proofing of the affected areas. The programme also promotes overall economic development and socio-economic improvement of the resource poor and disadvantaged in the programme areas. Some 961 blocks of 180 districts in 16 states are covered: Andhra Pradesh, Bihar, Chhatisgarh, Gujarat, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Karnatake, Madhya Pradesh, Maharashtra, Orissa, Tamil Nadu, Rajasthan, Uttar Pradesh, Uttaranchal and West Bengal where 11 738 watershed projects in an area of 5.9 million ha have been targeted for development in the next 4 - to - 5 years at a cost of Rs. 23.48 billion (US$500 million) with an average project size of 500 ha.

Desert Development Programme (DDP)

As recommended by the National Commission on Agriculture (1976), the Desert Development Programme (DDP) began in 1977 - 1978 in both hot desert areas of Rajasthan, Gujarat and Haryana and the cold deserts of Jammu and Kashmir, and Himachal Pradesh. Since 1995 - 1996, coverage has been extended to few additional districts in Andhra Pradesh and Karnataka. The programme focuses on mitigation of the adverse effects of desertification and adverse climatic conditions on crops, human and livestock populations, and combating desertification. The programme also aims at restoring ecological balance by harnessing, conserving and developing natural resources, i.e. land, water, vegetative cover and raising land productivity.

Since its inception until 1994 - 1995, over 550 000 ha were treated under the core sectors of land development, water resource development and afforestation/pasture development. Presently, 232 blocks of 40 districts in seven states are covered: Andhra Pradesh, Haryana, Gujarat, Himachal Pradesh, Jammu and Kashmir, Karnataka and Rajasthan. Currently DDP has targeted 5 353 watershed development projects over a 4 to 5 year period.

Integrated afforestation and ecodevelopment projects

State forest departments, autonomous bodies, research institutes and universities implement projects. The main objectives of the scheme are the (i) regeneration and ecodevelopment of degraded forests and adjoining areas on a watershed basis, (ii) augmentation of availability of fuelwood and fodder and (iii) employment generation for the most needy sections of society. About 227 000 ha were planned to be covered in the Ninth Plan.

Area oriented fuelwood and fodder project scheme

This scheme (i) augments production of fuelwood and fodder through regeneration of degraded forests and adjoining lands, (ii) promotes practices for efficient use of fuelwood and (iii) encourages people’s participation in planning, implementation and management of projects. An area of 341 000 ha is to be covered in the Ninth Plan (1997 - 2002).

Hill Area Development Programme and Western Ghats Development Programmes

These programmes started in the Fifth Plan with a focus on watershed development and are being implemented in designated hill districts of Assam, West Bengal, Uttar Pradesh and Tamil Nadu.

MANAGEMENT OF LAND AND WATER DEVELOPMENT PROJECTS

The government manages major and medium irrigation projects. Individual farmers maintain most minor irrigation facilities. Regarding watersheds, there is provision for the establishment of watershed associations comprising all adult members residing within the watershed area. If a project area covers only one village, the Gram Sabha (local council) will be designated as the watershed association. A watershed committee of 10 to 12 members representing various sections of society (nominated by the association) is primarily responsible for carrying out projects. In addition, there is a full time secretary, preferably a local graduate (from the same village or a nearby village) who is assisted by local volunteers to implement the watershed development project at the village level.

Another mode of developing and maintaining watersheds is to set up a Friendly Farmers Forum by village consensus to conduct the work of training farmers, reviewing watershed development progress and helping form self - help groups. NGOs are involved in training self - help groups and in watershed maintenance.

Watershed development programmes undertaken thus far have mixed story of success and failure. It is understood that these projects cannot succeed without full participation of project beneficiaries and careful attention to issues of social organization. This is because success depends on consensus among a large number of users. Moreover, collective capability is required for management of commons and for new structures created during the project.

BENEFITS OF INVESTMENT IN LAND AND WATER

The primary purpose of investment in land and water is to increase production and productivity. Employment generation with a view to providing livelihood to the rural people and maintenance of ecological balance are the other benefits expected of these investments. Studies undertaken to assess the impact of implementing major, medium and minor irrigation projects have shown increased employment potential and income generation in the command areas. In the case of watershed management and soil conservation, studies have also revealed a significant increase in land productivity, employment generation and improvement in the living conditions of local population. Budgets for these projects are mainly wage payments to local people engaged in construction and development work. The resultant structures are additions to capital formation in the economy. Other ecological benefits such as biomass creation and groundwater recharge follow as a consequence of watershed creation.

The Ministry of Agriculture assessed the impact of irrigation on increasing foodgrains production. It found that a 1 percent increase in the irrigated area would increase production by 4 million tonnes (if the area and production technology continued as before and fertilizer use increases at the same rate as in the recent past). The study shows that a major contribution to increase in production is attributable to expansion of irrigation facility. Therefore, continued efforts in the past to increase irrigation facilities in conjunction with technological improvements and increased input use have increased the agricultural GVA from Rs.811 billion (US$17.26 billion) in 1950 - 51 to Rs.2903 billion (US$61.76 billion) in 1990 - 2000. Foodgrain production increased from 51 million tonnes to 209 million tonnes during the same period and a major part of increase in it can be attributed to increase in area under irrigation. The corresponding increase in per capita availability of foodgrains was from 395 grams per day to 470 grams per day (Table 4).

TABLE 4

Increase in agricultural production and work force

The poverty line is defined as the level of expenditure below which it is not possible for a person to meet basic energy requirements and other needs. India's Planning Commission began identifying the poverty line and numbers of people below it in 1973 - 74, based on the results of National Sample Surveys on consumer spending. These measures show that the percentage of people below the poverty line has declined from 55 percent in 1973 - 74 to 26 percent in 1990 - 2000 (Box II, Table 5).

IMPACT OF POLICY ON INVESTMENT TREND AND PERSPECTIVE PLAN

(US$4.55 billion) in 1999 - 2000 (Table 2) its share in the total GCF has declined due to faster growth of investment in other sectors. The National Agriculture Policy adopted in 2000 (National Agricultural Policy, 2001), recognizes the inadequacy of agricultural investment. The policy proposes to create a climate conducive for increasing private sector investment in agriculture. Rural electrification, development of marketing infrastructure, augmentation of irrigation resources, fuller utilization India inherited a stagnant agriculture at the time of independence in 1947. The first task of the Indian Government in the immediate post - independence period was, therefore, to initiate growth in agriculture. A planning framework governed agricultural policy. The quantum of the Plan outlay, its financing and the targets set for the agricultural sector were all decided through the planning process at State and Central levels. The first three five - year Plans concentrated on growth with some institutional changes including abolition of intermediaries in agriculture, like Zamindars and Jagirdars. In the mid - 1960s, a new technology in the form of high yielding varieties (HYVs) was introduced for cereals. Apart from the new technology, public investment in agriculture particularly in irrigation rose significantly. The public sector played an important role in promoting agricultural research and education. Large investments were made for the development of research system under the aegis of the Indian Council of Agricultural Research (ICAR) and the State Agricultural Universities (SAUs). Simultaneously, a well - designed extension network was created for disseminating new technologies to farmers. The administered price policy has provided incentives to the farmers. Successive Five - Year Plans aimed at improving infrastructure through irrigation, stepping up the use of fertilizers, improved varieties of seeds, implements and machinery and supply of credit. All these measures encouraged and induced the farmers to increase investment in land and water, and consequently the private investment in agriculture started moving upwards at a faster pace.

Though Gross Capital Formation in agriculture increased from Rs. 49 billion (US$1.04 billion) in 1955 - 1956 to Rs. 214 billion of the irrigation potential, and setting up of agro - processing units in the producing areas are specified in the policy. Further, the National Water Policy adopted in 1987 emphasises among other things, the importance of watershed management.

Growth with equity and sustainability is the basic principle underlying National Agriculture Policy as well as the approach to the Tenth Five - Year Plan beginning in 2002 - 2003. Reducing the poverty ratio by 5 percent and providing gainful employment to the added labour force by the end of the plan period are included in the targets. It is intended to increase production by increasing investments in agriculture sector. Diversification of agriculture, increasing cropping intensity, rain water harvesting, development of watersheds and development of rural infrastructure such as roads and electrification are important elements of the approach to Tenth Five - Year Plan.

A perspective plan indicating targets in respect of major, medium and minor irrigation projects and required expenditure is not yet finalized. However, in respect of watershed development, the committee on the Perspective Plan for Development of Rainfed Areas has fixed the following targets for 20 years covering arable and non - arable lands, considering the requirements of varied agro - economic zones.

To increase agricultural production at more than 4 percent per annum as envisaged in the National Agricultural Policy, total investment in agriculture must also increase at the same rate under the assumption that incremental capital - output ratio remains constant in the future.

COMPLEMENTARITY BETWEEN PUBLIC AND PRIVATE INVESTMENT

Public sector investment in agriculture is directly or indirectly expected to increase private sector investment. In India it has been observed that public investment was higher than private investment until 1980, but its share began to decline in subsequent years. However, private sector investment has been increasing continuously. This may raise doubt regarding the positive relationship between the two sectors. However, a closer look would reveal that the phenomenon is due to the time lag between public investment and the induced private investment. There is a strong correlation between public and private investment if we take the delayed effect into consideration. Further, public investment in electrification and rural infrastructure (not included in agriculture GCF) also influences private investment. The National Agriculture Policy and the approach to the Tenth Plan have rightly emphasized increasing public investment in irrigation and land development along with the development of rural infrastructure.

TABLE 5

Number of Indians below poverty line

TABLE 6

Costs associated with five - year Plan periods

CONCLUSION

Land development and irrigation have been given high priority in India's various Five - Year plans. Areas under cultivation and irrigation have increased significantly. Foodgrain productivity increased due to irrigation and the introduction of high yield varieties. Per capita foodgrain availability increased from 395 grams per day in 1950 to 470 grams per day in 1999. Incomes also increased, enabling people to fulfil their calorie requirements of food. This resulted in reducing the percentage of persons below the poverty line from 55 percent in 1973 - 1974 to 26 percent in 1999 - 2000. However, it is necessary to step up investment in land and water to increase production substantially, ensure food security in the wake of population increase and make agriculture a viable occupation in the global economy.

DRAFT STATEMENT ON INVESTMENT IN LAND AND WATER

India continues to be a predominantly agricultural economy with almost two - thirds of its population depending on agriculture for livelihood. The growth of agriculture in recent decades - particularly foodgrains production - has been spectacular. India has not only become self sufficient in foodgrains but has begun to produce exportable surpluses. Development policies and schemes have led to rising income levels of the population and the incidence of poverty has reduced substantially. Growth in the agricultural sector has been possible because of such policies as significant public investment in land and irrigation facility development, emphasis on research and development, and new technologies.

Indian agriculture is only 40 percent under irrigation and remains heavily dependent on monsoon rainfall. A significant proportion of land is degraded requiring substantial investment for its improvement. Overall agricultural productivity is still far below its potential. About 80 percent of all farmers belonging to small farmer and marginal categories and have limited capacity themselves to invest in improving productivity.

Public investment in agriculture has declined. It is recognized that the decline must be halted and investment stimulated, particularly in irrigation and land development for the diversification of agriculture, improving cropping patterns and increasing productivity for food security. The green revolution must be extended to rainfed areas.

India recently prepared a long term National Agricultural Policy to achieve an annual agricultural growth rate of 4 percent by using the untapped potential of Indian agriculture for food and nutritional security and strengthening rural infrastructure to support faster agricultural development. This would accelerate the growth of agribusiness, create employment in rural areas, secure a fair standard of living for farmers and agricultural workers, help eliminate poverty and discourage migration to urban areas. It would also help the agriculture sector face challenges arising from economic liberalization and the adverse affects of globalization.

REFERENCES

Central Statistical Organisation, 2001. National accounts statistics 2001, Government of India. New Delhi.

Central Statistical Organisation, 2001. National accounts statistics - back series, Government of India. New Delhi.

Central Statistical Organisation, 1989. National accounts statistics - sources and methods, Government of India. New Delhi.

Directorate of Economics & Statistics, 2001. Agricultural statistics at a glance 2001, Ministry of Agriculture, Government of India. New Delhi.

Directorate of Economics & Statistics, 1998. Land use statistics at a glance 1996 - 97, Ministry of Agriculture, Government of India. New Delhi.

Directorate of Economics & Statistics, 1999. Land use statistics at a glance 1997 - 98, Ministry of Agriculture, Government of India. New Delhi.

Department of Agriculture & Cooperation, Compendium of impact evaluation studies of national watershed development project for rainfed areas, Ministry of Agriculture, Government of India, New Delhi.

Government of India, 2000. National agriculture policy, Government of India, New Delhi..