Column : The elusive 4% agricultural growth
Normally, to decipher growth of any sector, one looks at it as the outcome of investments and capital output ratios. This is typically a supply-side strategy, which implicitly assumes that there is ample demand for whatever is produced. The Planning Commission has been assuming that the capital output ratio in agriculture hovers around 4:1. Graph 1 shows that the investments (gross capital formation) in agriculture, both by public and private sectors, had been hovering between 8-13% during the 1980s and 1990s. Given a capital output ratio of 4:1, it was natural that the agri-GDP grew by around 3%. But thereafter investments in agriculture have seen significant improvement crossing 20% of agri-GDP by 2009-10. This should have logically given 4-5% rate of growth in agri-GDP. But
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