Priority should also be given to public investment in soil and ground water conservation, forest denudation and waste land development.

The chamber has noticed a decline in public investment in agriculture due to diversion of scarce resources from investment to current expenditure in the form of increased subsidies for food, fertilisers, electricity, irrigation, credit and other agricultural inputs rather than on creation of assets.

The chamber has identified that besides directly enhancing the stock of capital employed in the agriculture sector, public capital formation in agriculture is known to stimulate farmers' own investments in farm business, resulting in a further enlargement of capital stock of agriculture. According to one assessment, there is almost one-to-one correspondencebetween the two categories of farm investments.

The strategy to increase capital formation in agriculture should include increased plan outlay and an increased proportion for development of infrastructure, more efficient use of resources to raise productivity and ensuring remunerative prices to farmers to enable them to use own savings for higher investment, recommends PHDCCI.

Investment or gross capital formation in agriculture by public and private sector together showed an increasing trend during seventies and eighties despite yearly fluctuations. The rising trend in private investment may be due to the improved trade policy regime for agriculture vis-a-vis industry in the post reform period.

The PHDCCI attributes the decline in public investment to diversion of resources from investment to current expenditure in the form of increased subsidies for food, fertilisers, electricity, irrigation, credit and other agricultural inputs rather than on creation of assets.

Other reasons cited for slow growthin public investment in agriculture are larger expenditure on maintenance of existing projects, relatively low allocation for irrigation, rural infrastructure and research, more emphasis on food security, lack of effective credit support and credit infrastructure in rural area.

Bulk of the public investment in agriculture takes place on account of the state under whose exclusive purview comes agriculture (including irrigation) as per the India Constitution. Net borrowings from the market plus surplus on revenue account together determine the total availability of investment funds with the state governments.

The brunt of investment fund scarcity with the state government in recent years appears to have borne by agriculture sector, says the chambers.