Essential Determining factor of Private Investment in Indian Agriculture: A Statistical analysis

A declining trend in the momentum of public investment in agriculture after the decade of 80s was considered as a major factor in agricultural slowdown in the 1990s.This paper has explored the determinants of private investment in Indian agriculture, applying the general to specific OLS approach. The analysis of the determinants of private investment has been done through the multiple regression analysis. The estimated coefficients for all independent variables are positive and significant revealed that private investment in agriculture is positively and significantly affected by public investment, institutional credit and terms of trade. The nature of relationship between dependent and independent variables can be estimated by running regressions including different combinations of independent variables. Impact of institutional credit is positive and significant on private investment with public investment and terms of trade. Terms of trade was positive but not significant with public investment while it was positive and significant with institutional credit. Impact of public investment with TOT and credit turned out to be negative and significant at national level. Terms of trade induced private investment in agriculture in the short run and institutional credit in the long run. Public investment in agriculture was a positive determinant of private investment in India. This is an indication that public investment in agriculture, particularly in infrastructure, leads to increases in private investment in agriculture. The study suggests that larger development agenda is not expected to be addressed by private sector, and that continues to be the domain of public sector investment.