Farm capital formation falls

Quoting Finance Secretary Montek Ahluwalia, it said recent public investment trends in India8217;s agriculture have been stagnating in real terms. The World Bank has found that underpinning the success stories of many emerging market economies are high ratios of public investment in agriculture.

From 1996, there has been enough liquidity in domestic capital market but there was a noticeable fall-off in the financing of agro-industry projects. 8220;With high short-term interest rates, banks were making more money on spreads in money markets then they couldhope to obtain in project financing, especially in agribusiness projects which had become problem loans in many Indian bank portfolio,8221; the study said. With the advent of economic liberalisation and the priority assigned to the food processing sector, there were a rash of green field ventures in agribusiness. 8220;Figures on real, private equity capital devoted to agro-industries are questionable because of many of the projects had high levels of equity participation sourced from parastatal organisations,8221; the paper said. In fact between 1990 and 1994, India ranked the lowest of key emerging markets in East Asia and Latin America, with private fixed investment acconting for 13 per cent GDP.