ABSTRACT
Of India’s 540 million people, about 70 per cent depend on farming for their livelihood. They are supported by only 20-25 per cent of India’s capital stock. Private agriculturalists’ saving has been very slightly in excess of private agricultural investment. The main reason why the rural share of India’s population has not fallen is demographic. The rural skill drain reflects the Indian Government’s success in extending primary schooling to the villages, and its refusal to restrict the free movement of labour. The artificially low rate of exchange for the rupee, together with import licensing policy and the much higher role of foreign exchange in non-agricultural than in agricultural inputs, constituted a hidden resource transfer from agriculture to non-agriculture.
