Previous Year Question
In India, which of the following can be considered as public investment in agriculture?
Fixing Minimum Support Price for agricultural produce of all crops
Computerisation of Primary Agricultural Credit Societies
Social capital development
Free electricity supply to farmers
Waiver of agricultural loans by the banking system
Setting up of cold-storage facilities by governments
Select the correct answer using the code given below:
1, 2 and 5
1, 3, 4 and 5
2, 3 and 6
1, 2, 3, 4, 5 and 6
Correct Answer: C
Detailed Solution
Public investment in agriculture refers to government expenditure that creates physical, technological, institutional or social assets capable of improving agricultural productive capacity and productivity over a prolonged period.
Irrigation, rural roads, agricultural research, storage, market infrastructure, digital institutional capacity and human-resource development are examples of public investment.
1. Fixing MSP for all crops—Not public investment
MSP is a price-support policy. Merely announcing an MSP does not create a durable asset. Government procurement linked with MSP may involve expenditure, but fixing a price itself does not constitute capital formation.
Moreover, the Government does not announce MSP for “all crops”; it announces MSP for specified mandated crops.
2. Computerisation of PACS—Public investment
Computerisation of Primary Agricultural Credit Societies creates digital infrastructure and improves accounting capacity, transparency and the long-term efficiency of the rural credit-delivery system.
It can:
Digitise accounts and loan records.
Improve audits and financial reporting.
Facilitate more efficient delivery of credit and other services.
Improve integration of PACS with District Central Cooperative Banks and State Cooperative Banks.
It therefore creates institutional and digital capital and qualifies as public investment.
3. Social capital development—Public investment
Social-capital development may include farmer organisations, cooperatives, Farmer Producer Organisations, training, agricultural extension and community-based institutional capacity.
It can improve:
Mutual trust and cooperation among farmers.
Collective purchase of inputs and marketing.
Dissemination of technical knowledge.
Bargaining power and market access.
Government expenditure on such capacity can improve long-term agricultural productivity and farmers’ capabilities.
4. Free electricity—Not public investment
Free electricity is principally an input subsidy or revenue expenditure. It reduces the farmer’s current irrigation cost but does not directly create a new durable asset.
Government expenditure on electricity-distribution systems, dedicated agricultural feeders or solar-irrigation infrastructure may constitute investment, but providing electricity free of charge does not.
5. Agricultural loan waiver—Not public investment
A loan waiver is a financial-relief measure that reduces existing liabilities. It does not automatically create irrigation, machinery, storage or another productive asset. It is therefore treated as a transfer or fiscal relief rather than capital investment.
6. Government cold-storage facilities—Public investment
Cold storage is a durable physical asset. It can:
Reduce post-harvest losses.
Extend the usable life of perishable produce.
Help farmers avoid immediate distress sales.
Improve agricultural supply chains and price stability.
Support marketing of fruits, vegetables, dairy products and other perishables.
Therefore, items 2, 3 and 6 constitute public investment in agriculture.