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Investigating the Structure, Magnitude and Trends of Capital Formation in and for Agriculture: Country Case Study of Nepal
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Nepal with per capita income of US$ 400 is among the poorest countries. Two-thirds of the labour force engages in agriculture that contributes 32 percent in the gross domestic product (GDP). Nearly 31 percent of the population lives below the nationally defined absolute poverty line and a dollar a day population is still larger. Poverty, food insecurity and hunger remain endemic to the country particularly in rural areas. Persistent poverty and food insecurity are often associated with, and can largely be attributed to sluggish growth of agriculture hovering around two to three percent and low land and labour productivities. The key to reverse the situation lies in generate growth in agriculture sector increasing the land and labour productivities which needs an increase in investment in agriculture and formation of capital in and for agriculture. The growth in agriculture is the outcome of the combined use of factors of production. The factors of production are direct and indirect. Land, labor and capital are the main direct factors of production and management is the main indirect factor of production. The contributions of the direct factors of production in growth can be measured directly and separately. Intermediate inputs such as feed and fertilizers are also the direct factors of production. Any improvement in the direct factors of production is considered as capital formation. The technological know how is the indirect input that makes direct inputs effective and efficient (Solow 1956). Investment in human resource development increases efficiency of not only the labour but also that of the other factors of production like land and capital. Educated persons can develop and adopt new and innovative techniques for making the agriculture labor and capital efficient. It decreases the costs of production and also enhances quality of the production from the given factors. Total factor productivity (TFP), the measure of the role of technology in the production process, is the portion of output not explained by the amount of inputs used in the production process. Improvement of capital formation and the production capacity is more important for agriculture that has challenge to feed the increasing global population and reducing the mass poverty. The capital formation occurs in agriculture when savings are used for investment in agriculture production. Capital formation in agriculture is still more important is developing countries where capital base is very poor constraining the production capacity. It is widely recognized that per dollar invested in agriculture capitals yields more than the dollar invested to other sectors.
#Capital #Agriculture
PARTC, FAO ,   (2010 )
Type / Script:
Draft in English
Thematic Group:
 FAO : Food and Agriculture Organization
04.01.01  -  Agricultural Economics And Policy; Rural Sociology
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