The present study analyzes the effectiveness of rural physical
infrastructure on land productivity. Physical Infrastructure
includes irrigation, electricity, transportation and communication.
The final selection of the items in each category has been
made on the basis of a priori study and regression through
backward elimination. It is a novel attempt by the Principal
Component Analysis, to construct infrastructure index at
district level for Orissa. This study observes asymmetry
in the spread of physical infrastructure across the three
major regions of the state. The analysis also explores that
land productivity is low in the Kalahandi-Bolangir-Koraput
(KBK) belt and in certain districts of the Western-Central
Orissa, in comparison to the Coastal Orissa. This may be
ascribed to the underdevelopment of infrastructure. All
the two variable regressions of land productivity on individual
infrastructure items—irrigation and electricity, except
road density, are significant. The overall physical infrastructure
index is highly significant in raising land productivity.
The elasticity coefficients obtained from log-linear models
are less than unity, but significant. The study attributes
this inelasticity to the base and scale effects. This finding
from the state of Orissa reinforces the significance of
non-price factors in agriculture, which has strong policy
implications.
A recent study has shown that the net farm income is growing
at about 1% per annum, which is not enough to keep pace
with the inflation (Sen and Bhatia, 2004). As a consequence,
the farmers as a lot are distressed. This situation should
change sooner, rather than later. Agriculture should grow.
How
can agriculture grow? Economists are divided over the issue.
There are two distinct views in this regard. Firstly, government
should give price support (read subsidies) to agricultural
inputs, viz., fertilizer, irrigated water, seeds, implements,
etc., and secondly, government should strengthen the rural
infrastructure—irrigation, rural roads, rural electrification,
storage and processing, rural credit, marketing and so on.
The two views are to some extent complementary, but to a
great extent contradictory. These are complementary as a
mix of the two approaches may place agriculture in a better
space. However, considering the resource constraints, in
one hand, and the huge demand magnitude, on the other, we
cannot opt for both the options simultaneously. When the
matter of choice arises, economists have no other alternative,
but to take one of the two sides. So, the debate between
the relative effectiveness of the price and the non-price
factors on agricultural growth is long-standing. Chalking
out the suitable strategy is crucial for agricultural growth
as well as for poverty alleviation. |
