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University Microfilms International 300 North Zeeb Road Ann Arbor, Michigan 4S106 USA St. John's Road, Tyler's Green High Wycombe, Bucks, England HP10 8HR 77- 24,646 KALLA, Jagdeesh Chandra, 1936- SAVING INVESTMENT BEHAVIOR OF FARM FAMILIES— UDAIPUR DISTRICT— RAJASTHAN (INDIA). The Ohio State University, Ph.D., 1977 Economics, agricultural

Xerox University Microfilms Ann, Arbor, Michigan 48106

@ 1977

JAGDEESH CHANDRA KALLA

UDAIPUR DISTRICT - RAJASTHAN (INDIA)

DISSERTATION

Presented in Partial Fulfillment of the Requirements for

the Degree Doctor of Philosophy in the Graduate

School of The Ohio State University

Jagdeesh C. Kalla

•k it k it it

The Ohio State University

1977

Reading Committee: Approved by

Norman Rask Edgar T. Shaudys ' (Adviser) Dale W. Adams Department of Agricultural Economics and Rural Sociology DEDICATION

To the ’love-hate' relationships of the

faculty at University of Udaipur

ii ACKNOWLEDGMENTS

The author is deeply indebted to Dr. Norman Rask and Dr. Raj

Krishna, who as supervisors of this dissertation, gave valuable encouragement, assistance and guidance.

Guidance and personal counsel from Dr. Mervin G. Smith, Dr.

Edgar T. Shaudys, and Dr. Dale W. Adams of The Ohio State University are most sincerely appreciated.

The constant encouragement of Dr. David H. Boyne, Chairman,

Department of Agricultural Economics and Rural Sociology, The Ohio

State University is acknowledged with gratitude.

Appreciation is extended to my colleagues Mr. D. L. Vyas, and

Mr. M. L. Purohit, respectively Junior Economist and Sociologist at

The Central Arid Zone Research Institute, Jodhpur for their uncondi tional assistance in processing of the data. Special thanks are due to Dr. H. S. Mann, Director, Central Arid Zone Research Institute,

Jodhpur and S. P. Malholra, Head, Division of Economics and Extension for their encouragement. Friendly cooperation from Rahul, Shekhar,

Surinder and Arcadia are deeply appreciated.

The author wishes to remember late friends and family members,

M. L. Vyas, V. D. Joshi, Ms. K. Rathore, Ms. S. Vyas, J. C. Sharma, and Dr. Vimlesh Purohit who would have been very happy to see this research concluded.

iii ACKNOWLEDGMENTS - Continued

The deepest gratitude is expressed to the author's wife Mrs.

Radha Rani Kalla, his sons, Aaloke and Vivek, his parents Mrs. and

Mr. Ram Chandra Kalla, and close friends Dr. A. Rathore and Mrs. and Mr. Glenn Wasserman for their encouragement, sacrifices, and constant support throughout the duration of this study.

Finally, the sincere thanks are due to Ms. Sherry Levy and Jean

Campion who typed the dissertation with admirable accuracy and pre cision.

iv VITA

November 30th, 1936 ...... Born Jodhpur, Rajasthan (India)

1960...... B.Sc. Ag., University of Rajasthan,

1962...... M.Sc. Ag., Agra University, Agra, Uttar Pradesh (India).

1962-1966 ...... Teaching undergraduates and graduates at Rajasthan College of Agriculture, University of Udaipur, Udaipur, Rajasthan (India).

1966-70 ...... Graduate student, Department of Agri cultural Economics and Rural Sociology, The Ohio State University, Columbus, Ohio.

1971-72 ...... Teaching, Research and Extension at College of Agriculture, Jobner (Jaipur), Rajasthan (India).

1972-till date...... Production Economist, Central Arid Zone Research Institute, Jodhpur Rajasthan (India).

FIELDS OF STUDY

Major Field: Production Economics

Studies in Economic Theory. Professor Karl H. Borch.

Studies in Research Methodology. Professor Howard C. William.

Studies in Farm Management and Production Economics. Professor Edgar T . Shaudys.

Studies in Agricultural Education and Extension. Professor Ralph J. Woodin.

v TABLE OF CONTENTS

Page

ACKNOWLEDGMENTS...... iii

VITA...... v

LIST OF TABLES...... viii

LIST OF PLATES...... x

Chapter

I. INTRODUCTION ...... 1

The Problem and Study Justification...... 1 Objectives ...... 3 The Nature and Source of Data...... 4 Method of Analysis ...... 5 Organization of Study...... 6

II. REVIEW OF LITERATURE ...... 7

Savings...... 7 Investment...... 13 Conclusion...... 25

III. DATA DESCRIPTION AND ORGANIZATION...... 27

Criteria for Sample Selection...... 28 The District...... 29 The Panchayat Samiti ...... 37 The Villages...... 38 The Family Units ...... 40 Concepts Used in the Study ...... 42

IV. MEASUREMENT AND ANALYSIS OF SAVING...... 48

Comparative Reconciliation of Alternative Savings Estimates...... 48 Reliability Tests...... 51 Propensities to S a v e ...... 57 Conclusion...... 62

vi TABLE OF CONTENTS - Continued

Chapter Page

V. ANALYSIS OF INVESTMENT BEHAVIOR OF FARM FAMILIES IN UDAIPUR DISTRICT...... 64

Introduction ...... 64 Structure of Investment...... 67 Productivity of Investment ...... 72 Propensities of Investment ...... 81 Conclusion...... 85

VI. SAVING-INVESTMENT RELATIONSHIPS AND ECONOMIC SURPLUS MOBILIZATION POLICY...... 86

Introduction ...... 86 Saving-Investment Relationships...... 86 Net Investible Surpluses...... 89 Net Surpluses of the Farm Sector...... 91 Alternatives for Surplus Mobilization...... 93 Conclusion...... 97

VII. SUMMARY, CONCLUSIONS AND POLICY IMPLICATIONS . . . 98

BIBLIOGRAPHY...... 104

APPENDIX A ...... 110

APPENDIX B ...... Ill

APPENDIX C ...... 112

APPENDIX D ...... 114

APPENDIX E ...... 115

vii LIST OF TABLES

Table Page

1. Estimates of Direct Savings Per Farm Families in Various Parts of India ...... 9

2. Estimates of Indirect Saving Per Farm Families in Various Parts of India ...... 12

3. Estimates of Gross Investment Per Farm Family in India...... 18

4. Land Use Pattern in Udaipur District (1968-69) .... 30

5. Cultivator Households According to Size of Holding and Source of Acquisition in the Rural Area of Udaipur District (1960-61) ...... 33

6. Annual Area Planted to Principal Food Crops in Udaipur District (1964-69) ...... 34

7. Extent and Inter-Crop Distribution of Irrigated Area (ha) in Udaipur District (1966-69)...... 36

8. Characteristics of Sample Villages in Udaipur District (1968-69) ...... 39

9. Distribution of Total and Sampled Farm Families From Three Villages of Udaipur District (1969-70). . 41

10. Category-Wise Tests of Significant Means and Relative Dispersal on. the Difference in Direct and Indirect Gross Saving Per Sample Farm Families in Udaipur District (1969-70) ...... 49

11. Category-Wise Correlation and Product-Moment Reliability Tests for Alternative Measures of Saving of Farm Families in Udaipur District (1969-70)...... 53

12. Propensities to Save for Farm Families in Udaipur District (1969-70) ...... 58

viii LIST OF TABLES - Continued

Table Page

13. Current Farm Investment of Farm Families (Rs/ Family) in Udaipur District (1969-70)...... 65

14. Current Non-Farm Physical Investment (Rs/Family) of Sample Families in Udaipur District (1969-70)...... 68

15. Current Financial Investment Per Farm Family (Rs) in Udaipur District (1969-70)...... 70

16. Pearson Correlation Matrix Indicating Degree of Association Among Farm Business Incomes and Current Farm Asset Categories for Traditional (T^), Transitional (T2) and Advanced (T-j Farm Families in Udaipur District (1969-70) ...... 74

17. Productivity of Farm Assets for Traditional, Transitional and Advanced Farm Families of Udaipur District (1969-70) ...... 76

18. Relative Importance of Farm-Asset Productivity in Relation to Farm Business Incomes of Traditional (T^), Transitional (T2), and Advanced (T3 ) Farm Families of Udaipur District (1969-70) ...... 78

19. Non-Farm Asset-Productivity of Farm Families in Udaipur District (1969-70)...... 80

20. Average and Marginal Propensities to Invest (Net) and Income Elasticities of Sample Farm Families in Udaipur District (1969-70)...... 82

21. Saving Investment Relationships of Farm Families in Udaipur District (1969-70)...... 87

22. Estimates of Investible Surpluses for Farm Families of Udaipur District (1969-70) ...... 90

ix LIST OF PLATES

Plate Page

I. Locations of Panchayat Samiti Girwa, Udaipur District, and State of Rajasthan in India ...... 28

II. Location of Sample Villages in Panchayat Samiti Girwa...... 31

x CHAPTER I

INTRODUCTION

The Problem and the Study Justification

Disappointing rates of economic growth in many developing countries are often linked to a scarcity of domestic savings. Low levels of savings in turn result from inadequate income from which to generate savings. This argument is reflected in most Keynesian and Post-Key nesian growth literature. Others have recently argued, however, that a substantial saving capacity may exist in low income countries which might be tapped.

In early stages of development, agriculture is usually a dominant sector. One of the ways this sector contributes to economic growth is through the transfer of capital to the industrial sector. This is only possible when the agricultural sector acquires a self-sufficient capacity to generate savings. Despite this important role, little is known about capital formation in the agricultural sector. This is due, in part, to the lack of appropriate data and to the existence of non monetization. Conceptual difficulties encountered in measurement of rural households also hinder meaningful research efforts.

Recently the availability of improved technology in the farm sec tors of low income countries (LIC) has caused substantial increases in agricultural production. There is now a good deal of evidence that adoption of new technology in LIC’s has increased the income-generating capacities of many farm sectors. Despite this, recent farm-level studies (Shah and Agrawal, 1970; Garg, et al., 1970) have reported that some farm households are unable to meet additional costs because of lack of financing.

In their efforts to create conducive conditions for increasing agricultural production over time, governments in LIC's including

India already have incurred formidable public expenses. Any further allocation of outlays from the public exchequer to agriculture can only be done at the expense of neglecting vital commodities like steel, cement, heavy machinery and electrical goods which have high socio-economic pay offs (Annon., 1970). Neglect of the industrial sector, thus, would result in impairing prospects of balanced growth.

Therefore, a substantial part of the additional resources needed to support new technology in the agricultural sector must be generated and effectively mobilized within and from the agricultural sector itself.

Recent studies in India, for example Panikar's study in 1970, reported extensive rural household savings. Despite this very little is known about the portfolio behavior and determinants of the saving capacities. Except for a few studies (Kahlon, et al., 1970 and others), negligible information is available on the saving, investment and income differences of traditional and innovative farm families. This is basically so because large inter-state and even intra-state vari ances in the resource endowments exist in a country the size of India.

Coupled with a general dearth of research results, these variances do not allow comparisons that can be used for evolving a meaningful growth

policy for the agricultural sector. Thus, additional In depth research

on the saving-investment behavior of traditional and innovative peasant

families at the district level is needed.

Finally, conceptual problems have been encountered in the accurate

specification and measurement of the various income and asset variables

necessary to determine accurately farm level saving and investment

behavior. This has resulted in discrepancies between the results of

two common measurement procedures for determining savings, the income

and asset-accounting methods. Additional study is needed to determine which method, and under what conditions, will yield superior measure ments of savings.

Objectives:

The principal purpose of this study is to estimate saving capaci

ties for traditional, transitional and modern farm families. Within

this broad objective, several operational objectives are specified.

They are as follows:

1. To measure the capacity of farm families to save from current

Incomes,

2. To test the comparative efficiency of both income and asset-

accounting methods of measuring savings,

3. To describe the asset-structure of the farm families,

4. To measure the productivity of this asset-structure,

5. To describe investment behavior of the farm families, and,

6. To suggest policy objectives relating to mobilization of surplus

savings in rural areas. The Nature and Source of Data:

The data used in this study were collected from 140 farm families in three villages in the district of Udaipur, State of Rajasthan, India.

All farm families in the three villages were classified into three categories based on size of holding. A random sample of about 30 percent within each village was selected for personal interview.

Farm categories were less than 4.99 acres, 5-9.99 acres, and 10 and more acres. The villages of Bujra, Manwakhera, and Matoon were selected on the basis of their high irrigation to cropped land ratios.

The details of population characteristics, size of farms, size of family and other information is reported in Chapter III.

The primary data on farm income, consumption, savings (asset and income-accounting), net worth, family characteristics, size of farm,

Investment pattern and extent of technological adoption were collected in two rounds in the months of April and June of 1970 for the cropping year 1969-70.-i/ The data were collected on schedules specifically structured for this study. The initial interview information was verified in the second round of the survey.

The sample farms are generally of small size and fragmented into more than 4-5 parcels ranging from 0.4 acres to 10 acres each. On an average, a farm of less than 5 acres would support 5-15 members of an extended family. Most farm families plant three crops per year and follow a mixed-farming pattern where livestock forms an integral part

1/ In India, the fiscal accounting year begins on April 1. Cropping years in agriculture are determined on the same basis. of the farm enterprise. Farm families generally live in settlements

located away from their farms. The farm decision-making rests gener-

2/ ally with the eldest family members and barring Brahmins and Rajputx'

respondents, women participate actively in carrying out day-to-day

farm operations.

Method of Analysis:

Savings of 140 sample households are estimated by both asset and

income-accounting methods. Three techniques of statistical compari

sons including correlations, and measures of central and dispersal

tendencies are employed for accounting and possible reconciliation of

the alternative measures of saving. Further, a step-wise regression model with income, net worth, consumption, age of operator, saving,

dependency ratios, family size and size of farm as explanatory vari

ables is used to locate the possible sources of discrepancy in the two

estimates of savings. The marginal propensities in strictly a Keynesian

framework are estimated for categories of sample farm families based

on size of farm and level of technological adoption. The propensity

coefficients are arrived at by using regression methods with saving

and income expressed as dependent and independent variables respec

tively.

The asset-structure of different categories of farm families is

analyzed by way of simple averages. The productivity of each major

asset group for different categories of farm families is estimated by

2/ Owing to their high social status, Brahmins and Rajput farmers do not allow female family members to work on farms. assuming linear income-investment relationships. Additionally, in quantifying income-investment relationships, both current and cumula tive assets are used.

Finally, the saving-investment relationships of different cate gories of farm families are arrived at by using simple averages. From these, estimates of mobilizable surpluses for Udaipur district are generated for drawing relevant policy implications.

Organization of Study;

The study makes use of static cross-sectional data for answering the questions regarding the dynamic variables like savings, investment and income. Use of cross-section data may not be free from certain methodological reservations (Chein, 1967). Yet a complete dearth of time-series data for the state of Rajasthan prompted the collection and use of cross-section data to answer important questions relating to the capital formation process.

A review of existing cross-section studies relating to capital formation forms the core of Chapter Two. Chapter Three concerns itself with the orientation and description of the area of survey, analytical procedures and concepts employed for this study. The description and analysis of capacities of farm families to save and reconciliation between alternative measurements of savings is presented in Chapter

Four. Chapter Five presents the asset-structure, investment behavior and productivity of farm and non-farm assets. In Chapter Six the saving-investment relationships, and policy issues relating to mobilizable surpluses in the district of Udaipur are explored. The summary and conclusions are presented in Chapter Seven. CHAPTER II

REVIEW OF LITERATURE

The major objective of this chapter is to review the literature concerning measurement of saving, investment, and income. To begin with, a detailed review of methodology and estimation of alternative measure ments of savings is presented. Following this, estimates of propen sities to save based on various surveys in different parts of India are presented. This is followed by a detailed documentation of asset-struc ture of farm families. Finally, the saving-investment relationship is examined in an attempt to evolve policy implications relative to surplus mobilization programs. Only studies employing cross-section data have been reviewed. Each of the above aspects of the farm-level capital formation process is presented in the sections that follow.

Savings

Savings of an individual household can be estimated directly as a surplus of income over variable consumption and production expenses incurred during an accounting period. Thus, if S ^ is gross savings per household in year 't', Yt the gross household income, Pt the vari able production expenses and Ct the consumption expenses, the savings of a family can be estimated 'directly' by the following identity:

Sght - Yt ' Pt - Ct <*>

7 Quite a few farm-level studies in different regions of India and elsewhere have used this method of direct measurement. Findings of the savings estimates of farm families in different parts of India are pre sented in Table 1.

It can be seen from Table 1 that there has been a high degree of variation in the estimates of direct savings. These variations can be attributed to spatial, productivity, and temporal situations. It is obvious however, that the peasants surveyed in the states of Punjab,

West Bengal, Assam, Orrissaand Coimbatore showed positive savings because income was defined as a sum of earnings from crop, livestock and non- agricultural activities.

Most of the saving estimates reported in farm management investi gations however are negative. This results primarily from a less inclu sive definition of income. These studies are based only on farm business income defined by the Ministry of Agriculture as the difference between gross returns accruing from crops and the cash expenses involved in production of crops (popularly known as Cost A2 ). Thus, while the reported consumption was based on the total receipts of the household, the farm business income represented only part of the total income earned by the farm family. This resulted in under-reporting of savings esti mates measured by the income-accounting method.

In several other LIC's, notably Taiwan, South Korea, and Brazil, the farm level saving capacities have been measured by employing direct methods.

Rask and Danny (1971) reported a saving potential of from seven to over

50 percent of the net cash incomes of over 800 farm families in Southern

Brazil. Simeonidis (1967), using a similar concept reported 17 percent 9

Table 1. Estimates of Direct Saving Per Farm Families in Various Parts of India

Year of Estimates (Rs) Saving as Ho. Source Reference Place Saving Income % of Income

1 Board of Economic Inquiry 1936-50 Punjab 163.00 11*95.00 10.9 2 Pilhofer, H. 19^9-55 Belakoba 107.00 1197.00 8.9 Pilhofer, H. 19*+9-55 Kendarpara 336.00 1 8 2 8 .0 0 1 8.1* Pilhofer, H. 19^9-55 Nevgong 2 2 2 .0 0 1961*. 00 11.3 Pilhofer, H. 191*9-55 Marcharpur 1*50.00 3281.00 13-7 3 Vakil, C.M., et. al. 1953-5U Saurashtra 890.00 2810.00 31.7 1) Iyengar, S.K. Ministry of Agriculture, Studies on Economics of Farm Management: 1951-52 Hyderabad 9 1 .0 0 111*7.00 7-9 5 Chandra, R.C. 1956-57 W. Bengal -309.2 U 1*31.71* -71.2 6 Rathar, B.S., et. al. 1963-65 Rajasthan -190.95 1 1 7 6 .2 6 -1 6 .2 7 Mathur, P.N., et. al. 1951+-56 M. P. - 2U . 98 1017.00 - 2.5 8 Agraval, G.D. 195**-57 U. P. - U.33 1081*. 33 - 0 .1* 9 Zacharias, W.B. and K.C. Basak 195l*-57 Madras -121.56 781.08 -1 5 .6 10 Chaudhary, B.JC. 1956-57 Punjab 11*1*8.90 6 8 7 .7 0 -65.3 11 Randhawa, N.S. and S.S. Atval 1955-57 Punjab - 6.29 1358.71* - 0.5 12 Driver, P.N. and M.D. Desai 195U-57 Bombay -212.1*9 5 1 0 .6 0 -1*1 .6 13 Gupta, S.M. and P.K. Mazra 1957-60 Orrisa -769.75 313.83 -21*5.3 lU Sarvesuara, B. 1957-60 A. P. - 25.1*6 11*65.1*1* - 1.7

Sources:

1. Singh, L. and A. Singh (191*6 ). Family Budgets 191*0-1*1, Board of Economic Inquiry, Punjab, p. 16; and Singh A. and A. Singh (19**9). Family Budgets, 19l)6_l+7 to 191*7-1*8, Board of Economic Inquiry, Punjab, p. iii. 2. Pilhofer, H. Studies of East Indian Jute Farms, Centre for International Studies, M.I.T. (Mimeo). 3. Vakil, C.N., D.T. Lakadavala, and M.B. Desai (1953). Economic Survey of 3au\ashtra, University of Bombay, Bombay. 1*. Iyengar, K.S. (1 9 5 1). Rural Economic Inquiries in the Hyderabad State, Government Press, Hyderabad. 5-15- Economics of Farm Management, Studies conducted by Ministry of Agriculture, Government of India. 10 and a negative three percent of savings for 251 livestock farm

families from Ibiruba and Lageado Muncipios of Rio Grande do Sul,

Brazil. Larson, et al., (1972) reported that a substantial portion

(28 percent) of the net cash income of farm families of Sao Paulo and

Rio Grande do Sol in Brazil was saved.

From the farm record keeping project of Taiwan, Tuan (1973) reported

growth rates of 22 percent of saving from current cash incomes during the

period of 1969-70. Ong, et al., (1976) reported that from 1960 to 1970

the voluntary saving per farm family in Taiwan continued to increase from

18 percent in 1960 to 28 percent in 1968 followed by a decline in 1969

(12 percent) and 1970 (20 percent). Hyun (1977) reported that for the period of 1962-1974 the average propensities to save for South Korean,

Taiwanese and Japanese farmers ranged from 7 to 35 percent, 12 to 31 percent and 14 to 22 percent respectively. Holmberg (1973) reported a

saving rate of about 11 to 14 percent of the net cash incomes of 103

Ethopian farm families surveyed in the years 1971-72, Lafertaza and

Reyes (1974) by surveying 94 rice farmers in Phillippine reported a

saving rate of about 10 percent of the increases in their gross incomes.

Pawar and Patil (1975), from a survey of 72 small sugarcane cultivators

in Maharashtra state of India in 1972-73, reported that as high as 37

percent of the gross receipts were saved from which almost half was held in the form of bank deposits. Kelley and Williamson (1968), while exploring causes of the variation in saving rates of 490 rural and urban households revealed that the Jogjakarta farm families saved an average of 20 percent of their gross income which was higher than their urban and labor counterparts. Similarly, Mizoguchi (1967) and Noda (1970) 11 reported a comparatively high rate of savings from Japanese farm families relative to urban households.

Another method of measuring savings for a farm family is popu larly known as the ’indirect1 (asset-accounting) method. This method measures changes in asset position (net of liabilities) of farm families during a reference period. Thus, if the addition to physical and finan cial assets of a farm family is larger than the additions to its liabili ties, a positive saving would accrue and the reverse would hold true if the addition to liabilities is greater than the addition of assets.

Formally, if PAfc is the change in ownership of physical assets, FAt the changes in the ownership of financial assets, Lt the change in liabilities, Cfc the net inflow of capital transfers, and CZfc the net capital gains, then gross savings of a household would be defined by the following identity:

Sght - - <“ > Conceptually, savings measured from the direct and indirect methods for an accounting period ’t’ should yield similar (if not the same) results. This, however, is not the case in real-life situations. Bhalla

(1976) by comparing two methods of saving from NCAER surveys for the years

1968-69, 1969-70, and 1970-71 reported discrepancies of 20, 11 and 5 per cent respectively in the two estimates of saving per household. These discrepancies have several possible sources. The "depression" and

"exaggeration" biases in the estimation of direct savings are suggested by Lansing (1962). In the asset-accounting method, while the majority of asset reportings are correct, the value of cash hoardings, investment in gold, silver, precious stones and consumer durables are often under reported. It has been suggested that a low degree of monetization in the 12

Table 2. Estimates of Indirect Saving Per Farm Families in Various Parts of India

Year of Estimates (Rs) Saving as No. Source Reference Place Saving Income % of Income

1 N . S. S., First Round 1950-51 India 219.80 607.00 36.2 (G)* 2 Dandekar, V.M. 1950-51 India 155.00 1967.00 7.9 (N) 3 Panikar, P.G.K. 1950-51 India 21*8.00 1309.00 18.9 (G) 1* Panikar, P.G.K. 1950-51 Rajasthan 179-00 892.00 20.1 (G) 5 R . C. S . 1951-52 India 153.00 661*. 00 23.0 (G) 6 N.C.A.E.R. 1961-62 India 62.00 21*8 .0 0 2 5 .0 (G) 7 R.B.I. 1951-52 India 195.00 1*875.00 1*.0 (N) 8 R.B.I. 1958-59 India 228.00 5700.00 U.O (N) 9 Desai, M.D. 1969-70 Gu j arat - 81*2.00 6785.00 -1 2 .1* (N) 10 Desai, M.D. 1970-71 Gu j arat 1305.00 71*82.00 17.1* (G) 11 Desai, B.M. and D.K. Desai 1969-70 Gu j arat 385.00 7978.00 U.8 (N) 12 Nandal, D .S. 1967-70 Haryana 1683.22 28618.99 5.6 (N) 13 Chakravarty, S.K. 1969-70 W. Bengal 65.07 2981.00 2.2 (n )

*N and G in parentheses denote respectively net and gross estimates of saving. 13

Sources:

1. Department of Economic Affairs, The National Sample Survey, General Report No. 1, Ministry of Finance, Government of India, New Dehli, December, 1952, Tables 60 and 86, pp. 128, ll+l. 2. Dandekar, V.M. (1953). Second Report of the Poona Schedules of National Sample Survey, Gokhle Institute of Policies and Economics, p. 93, 107 and 121. 3. Panikar, P.G.K., (1970). Estimates of Rural Saving in Rural Savings in India, (Somaya Publications, Pvt. Ltd., Bombay) p. 6 5. 1*. Panikar, P.G.K., Op. cit. p. 66. 5. Reserve Bank of India (19 5 6). All India Rural Credit Survey Committee Report Part 1, p. 731. 6. National Council of Applied Economic Research (196 3 ). All India Rural Household Survey Vol. II, New Delhi, p. 91. 7,8. Reserve Bank of India (i9 6 0). Estimates of Savings in the Indian Economy 1950-51 to 1957-58, Reserve Bank of India Bulletin, March, pp. 317-320. 9. Desai, M.D. (1973). Saving and Investment in Agriculturally Prosperous Area, 1969-70; Research Study No. 30, Agro-economic Research Centre, Sardar Patel University, Vallabh Vidyanagar, pp. 11*5-150. 10. Desai, M.D. (l9Jk). Saving and Investment in an Agriculturally Prosperous Area; A Case Study of Surat District in Gujarat 1970-71, Research Study No. 35; Agro-economic Research Centre, Sardar Patel University, Vallabh Vidyanagar, pp. 72-75. 11. Desai, B.M. and D.K. Desai (1971). Potentialities of Mobilizing Investible Funds in Developing Agriculture - A Study in Baroda District, Gujarat State Centre for Management in Agriculture; Indian Institute of Management, Ahemadabad, pp. 15, 31*. 12. Nandal, D.S. (1972). Pattern of Income, Investment, Expenditure and Saving of Selected Demonstration Farms in Haryana; Indian Journal of Agricultural Economics 31 (M: 12-19. 1 3 . Chakravarty, S.K. (l972). A Recent Change in Saving-investment Direction of the Small Cultivators in West Bengal - Case Studies in Hooghly District; Indian Journal of Agricultural Economics 31(1*): 6k-7k. 14 components of income, investment, and production expenses render the 3/ measurement of Indirect savings difficult.— Additionally, lack of knowledge regarding factor and product pricing, and depreciation of assets tend to further vitiate these estimates. Many farm-level estimates of indirect savings at national, regional and district levels have been reported. Some salient survey results of these estimations are presented in Table 2. The indirect estimates reported per farm family reveal that farm families in India did save a substantial part of their current incomes, not withstanding the variations.

A comparison of direct and indirect estimates as reported in Tables

1 and 2 does not lend itself to any generalization because of differences in the extent of coverage, methods of estimation and years of survey. It never the less, is obvious that the estimates of savings at district, regional, national, and international levels confirm that farm families in LIC's are not immune to the motivation of savings. On the contrary, barring few exceptions, most of the studies in LIC's, including India, have revealed that the peasants have potentials to, and are saving despite the primitive technology, subsistence oriented farm economy and climatic and economic uncertainties involved in the process of production in the agricultural sector. These results bring into question the pessimism expressed from time to time about weak incentives and ability to invest (Nurkse, 1962), meager incomes (Lewis, 1964), lack of ability and willingness to save in invest (Singh, 1965) by the farm families of

3/ Employing findings of the National Sample Surveys (1951 and 1962) and Rural Credit Committee Reports (1954), Panikar (1970) reported that only 57 percent of components in consumption, and production expendi tures including investment were monetized in India. 15 developing countries. It is none the less clear that the available

estimates of rural savings in LIC's do not allow verification because of

failure to employ both direct and indirect methods of savings in the

same survey.

Investment

The possible forms of investment by farm families can broadly be

categorized as physical and financial investment categories. Physical

investment includes farm, non-farm and consumption investments.

Financial investments includes local money-lending and deposits in

institutional financial agencies.

The total value of tangible and reproducible stocks of spending units constitutes investment. Gross investment can thus be defined as a pro cess of decision-making which involves outlays of cash in return for an anticipated flow of future cash benefits (Quirin, 1967). Corrected for price changes and depreciation it represents net investment. In the context of farm families, gross farm investment during an accounting period represents a sum of capital expenditure incurred on the purchase of land and land improvements, development of irrigation resources, farm equipment, farm structures, orchards and plantation and livestock.

Corrected for price changes, depreciation and sales of old assets, the

gross investment yields to the estimation of net farm investment for an accounting period.

Another category of investment is net acquisition (net of depreci ation) or creation of non-farm business assets like rural shops, flour mills and weaving equipment by farm families. Finally, acquisition or

formation of capital in terms of utensils, bicycles, sewing machines, 16 automobiles and residential building during an accounting year are considered as non-farm consumption investment. It should be noted that although consumer durables are not normally actively associated with the generation of income, services rendered by these extend beyond an accounting period. Thus on the criterian of tangibility, these consumer assets are considered an important constituent of the total investment 4/ process. Despite the difference of opinion among the economists,— these are commonly treated as part of investment because consumer durables like residential houses, transport machinery and utensils are used simultaneously for consumption and production purposes in developing countries.

Financial assets are another form of investment. Surplus cash is often invested in bank deposits, government-saving agencies like post office accounts, co-operatives, life insurance companies, provident funds, as well as in recoverable accounts with the local shopkeepers in anticipation of financial returns.

The work on investment by farm families can be classified into three categories. The first category includes the surveys conducted on a national scale like the National Sample Surveys by the Government of India, the Rural Credit Surveys by the Reserve Bank of India and Rural Household

Surveys by the National Council of Applied Economic Research. The

National Sample Surveys during 1950-51, collected data on investment per farm family which was composed of net acquisition of assets like land

4/ For a complete discussion of the treatment of consumer durables as a part of investment, see, Irwin Freird and Robert Jones, "Concepts of Savings" in Consumption and Savings, Vol. 2, University of Pennsylvania, Philadelphia, U.S.A., (1960) pp. 336-360. 17 improvements, new constructions, other improvements to the real estate, net purchase of land, farm houses, farm implements and machinery, non farm assets like buildings and premises, machinery, business assets, consumer durables and financial assets (bank deposits, small savings, life insurance, Provident Fund accounts, and purchases of gold and silver).

The Reserve Bank of India in its All India Rural Credit Survey defined net investment in terms of farm, non-farm business and financial investment including repayment of old debts. The farm investment in this survey represented the sum of current value added for purchase of land, livestock, reclamation of land, bunding and other land improvements, digging and major rennovation of wells, purchase of implements, and machinery, and transport equipment. The non-farm business investment was defined to include any net change in capital assets created by farm families on non-agricultural business. The financial expenditure invest ment according to the Survey consisted of purchase of shares of Co-op erative societies, postal savings, banks, purchase of bonds and national saving certificates during an accounting year.

The National Council of Applied Economic Research in its survey on rural households defined investment as the sum total of net acquisitions of farm, non-farm and financial assets. Farm investment included pur chase of land, land improvements, farm equipment, crd&tion of irrigation sources, farm houses and transport. Non-farm business investment included purchases of business assets. Financial investment in its turn included debt-repayment and outstanding accounts receivable, increase in lending, increase in business inventories, advances received and capital transfers. 17 improvements, new constructions, other improvements to the real estate, net purchase of land, farm houses, farm implements and machinery, non farm assets like buildings and premises, machinery, business assets, consumer durables and financial assets (bank deposits, small savings, life insurance, Provident Fund accounts, and purchases of gold and silver).

—»o • o -a o — *ja '->• 50 50 SB < 7 0 7 9 7 O * O ft O•* 33 9 © p - O t r X P 0 7 X 0 *-h ►H • »-* Agency/Scope/ • PCPc*pc'aPMCMP3*tO**fP« c* u* P p ►* D o S O D 0 3 0 pr«— C5r£*C— pt-BC-.firt-OM.sih.. 3 *9(1 791 n « Q« o> • . o . . Reference fear a?tprr*p*ip — :► cn •— cn a a "i a sr a *i * 1 ta 4 to « u p ^ . n a a a p • p • P • a < a 5 < a a a f* r»- a a 3 r» w. w M w 33 p c+ * —«■ p rf £3 e* sr ¥*• w a a * « at— c* »i O • a: r*»i w o. 31 .c* M «< «ff a 3 a 5 au m » o. m. • a

Land Improvement o d vo *- -4 M ft} i co

ru uj s o> W OS Purchase VO SO H* O

Livestock

ro ro vn India in Faally Farm Per Investment Gross of Estimates 3,Table i i i 'O I Ul sJl 23 CO I I Irrigation *-*i ro ro i i l o t i vn Transport

a vn cd s-n ro O t so Farm Equipment

ro i l i ro Structures

i i l I i Inventories w ro -a* l I l i u> —4 i I ro I Miscellaneous

Total Farm Assets a s vn ro w vn m o

Buildings I l t vi (y h so A n d Premises

o\ u> I I I vn I I Machinery

I I i I l ro l I I Inventories cr \j\ OD M ON i vn i Consumer Durables

I I I I OD I Miscellaneous

to Total Non-Farm Assets

Banks

r Small Savings

I W I i uj i i i Insurance

I I I i no i i i Provident Fund

u> I "4 I I ON i J“5 Gold and Silver

Lending

M Repayment of I {5 Old Debts ro 1 1 Other H Total Financier *- 3 M a Os ro CD on Assets

u> u> H CD ro u> vn NO NO on u> Total Investment a s $ \j> ro $ —J Table 3— Continued Cr.urctrs: 1 . Dnndckar, V.M. (1953). Second report of Poona Schedues of National Sample Survey, Gokhle Institute of Politics and Economics, Poona, pp. i-ix. 2. Reserve Bank of India (1956). All India Rural Credit Survey Report, pp. ^tl8—1*23. 3. Reserve Bank of India (1965). All India Rural Debt and Investment Survey, 1961-62, Reserve Bank of India Bulletin, p. 631. li. National Council of Applied Economic Research (1963). All India Rural Household Survey, Vol. II, Nev Delhi, p. 69. b. Rai, K.N. D.K. Grover, and D.S. Nandal (1972). Investment and Saving in Irrigated and Unirrigated Zones of Haryana State, Indian Journal of Agricultural Economics, 27(t): 75-82. 6. Shastri, C.P. (1965). Investment on Farm and Capital Formation With Special Reference to Bihar. Indian Journal of Agricultural Economics, 20(1): 171‘-lS3. 7. Patel, M.L. (1965). Farm Investment Pattern of a Tribal Village in Madha PradeBh. Indian Journal of Agricultural Economics, 20(1): 192-200. 8. Rhanja, P.K. (1965). Capital Formation in Agriculture at Farm Level - A Case Study of Three Villages in India. Indian Journal of Agricultural Economics, 20(1): 201-216. 9. Misra, B., H.K. Dasgupta and Jagnath Hisra (1965). Possibilities of Capital Formation in Agriculture in Cuttak (Orrisa), Indian Journal of Agricultural Economics, 20(1): 215. 10. Sanrhcti, D.C. (1965). A Case for Greater Capital Formation in Agriculture for Future Planning of Rajasthan. Indian Journal of Agricultural Economics, 20(l): 221-227. 11. Desai, M.D. (1973). Saving and Investment in an Agriculturally Prosperous Area - A Case Study of Farmers in Surat District, Cujarat 1969-70. Research Study No. 30, Preliminary Reports, Agro-Economic Research Centre (for Gujarat and Rajasthan) Sardar Patel University, Vallabh Vidyanag&r, p. 72. 12. Desai, M.D. (197t). Ibid. for year 1970-71, p. i-ix. 13. Desai, B.M. and D.K. Desai (1971). Potentialities for Mobilizing Investible Funds in Developing Agriculture (A Study in Baroda District, Gujarat State), Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad, p. 3t-38. it. Chakravarty, S.K., and P.R. Pattnaik (1970). Income Distribution and Saving-Investment Pattern of Cultivating Households (Case Studies in Orissa). Indian Journal of Agricultural Economics, 25(3): 99-110. 15. Chauhan, K.K.S., S. Mundle, and D. Jadhare (1972). Income, Savings and Investment Behavior of Small Farmers. Indian Journal of Agricultural Economics, 27(t): 1*5-50. 16. Chakravarty, S.K. (1972). A Recent Change in Saving Investment Direction of Small Cultivators in West Bengal (Case Studies inHooghly District, Calcutta), Indian Journal of Agricultural Economics, 27(t): 6t-7t.

NO 20

Consumer durables in this survey included purchase of gold, silver, and other household utility goods.

Thus, although the definition of investment did not undergo any substantial changes, the uneven categorization of certain items like repayment of debts, residential houses, and livestock make the compari sons of estimates difficult. Part of this difficulty stems from vari ation in survey objectives. While the National Sample Survey's explicit objective was to estimate consumption expenditure and level of living, the Reserve Bank of India Survey concerned itself mainly with the problem of rural credit. The National Council of Applied Economic Research

(NCAER) explicitly surveyed the farm families for estimating the capa cities to save and invest. These caveats not withstanding, the data on per farm family investments are presented in Table 3.

A perusal of Table 3 will reveal that each national survey varied in its extent of coverage. This caused much variation in estimates of total investment. It can never the less be seen from the results of national surveys that most of the investment structure was composed of farm assets. At the regional level, few attempts were made to present information on farm and non-farm assets. The results here also consist ently revealed that in the states of Rajasthan, Gujarat, Orrissa, and

West Bengal, the portfolio of farm families consisted mainly of farm assets, a substantial proportion of which were created in terms of land and livestock purchases. Except for farm families of Gujarat state, very few studies reported investment in non-farm business assets.

Despite the inter-regional variations in the structure of assets, it can be easily inferred that farm families in India are more apt to 21 invest their surpluses in traditional forms of farm investment like purchases of land and livestock. With the exception of a few farm-level studies (Bhanja, 1965; Desai and Desai, 1971; Desai, 1970; and Desai,

1973), information on financial investments was not reported. Despite the data limitations it still can be seen that purchases of gold ornaments, precious stones and bullions are an important asset-creation activity for the farm families in India.

The portfolio behavior of farm families in other LIC's have also been reported from time to time. Rask (1975) while documenting the pattern of farm investment for farm families in Brazil, included land owned, buildings, mechanized and non-mechanized equipments, trucks and auto, production livestock and work livestock. Irrespective of small, medium mixed farms and exclusively livestock farming categories, farm investment was composed of land, buildings, and livestock. Adams, et al., (1971) analyzed the farm record keeping accounts for the farm families of Taiwan. The study noted that over a period of 1960-70 the increase in liquid assets (including cash on hand, bank deposits, stored farm products, value of growing crops, livestock and poultry inventory, processed products held on farm and other liquid assets) increased by about 50 percent. Fixed assets on the other hand regis tered an increase of 56 percent, mostly increases in value of land.

Less than 10 percent of the increase in fixed assets was in value of buildings, machinery, and other classes of fixed assets.

It can be seen from the above studies that farm families in LIC's are motivated more towards creation of tangible farm and consumer assets. Almost all studies reveal a negligible preference toward 22 financial assets. One of the most important components which has been

uniformly neglected in all these studies is the non-monetized form of

investment. Even NCAER which attempted to account for this form of

investment considered the imputed wages of family labor employed for the

purpose of investment. It should be noted, however, that wood, stones,

and senhemp fiber do have opportunity costs. Their exclusion will only

partially report the non-monetized form of investment. Bhalla (1976)

reported that the labor components of non-monetized investment in India was about 11 to 16 percent and had a systematic tendency to decline with an increase in size of farm.

Saving and investment decision are very vitally related. The dominant saving motive of farm families is to finance investment. Further, invest ment decisions are based on the perception of profitable investment opportunity. Given such opportunities investment depends on the capa cities of farm families to save. However, due to the limits imposed on the qualitative as well as quantitative aspects of resource control including land and managerial ability, it is likely that profitable investment opportunity for a given household may cease to exist after a certain level of asset accumulation and income is attained by farm families. At this stage the factor affecting savings would be invest ment opportunities and the average saving rate may not increase.

Analysis of saving-investment relationships of farm families also raises important issues about the patterns of financing investment.

This is principally so because investment essentially represents exe cution of decisions to convert the investable funds into income generating assets. These decisions of investment from the total 23 accumulated investable funds face competition from within asset cate gories (farm, financial, business) as well as from consumption, and creation of consumer durables alternatatives.

The study of the saving-investment relationships of farm families has important policy implications. There is always the possibility of some farm families over-investing and others over-saving. The emergence and development of a ’’market" in which excess savers and excess investors can meet, is bound to provide stimulus to economic development through progressive investment climates in LIC's.

The literature about the saving-investment relationships at the farm level is too scanty to enable generalization. Kahlon (1972) reported that 35 to 44 percent of total investment by farm families of Punjab (India) was financed by disposable income. Pandey, et al.,

(1972) reported that eastern U. P. farmers of Varanasi and Deoria districts invested 81 and 86 percent of their gross savings. Shashtri

(1965), for Bihar farmers reported that about 27 percent of the current farm investment was financed by past savings, 36 percent by current income, 28 percent by sales of asset and 9.2 percent through borrowing.

Bhanja (1965) while reporting on the process of capital formation at the farm level in three villages, one selected from each of the states of West Bengal, Orrissa and Bihar noted that savings formed a major source of financing farm investment excluding pumps and creation of irrigation sources which were mainly financed through institutional sectors. Self-financing was again overwhelmingly dominant in acquisi tion of ornaments, financial assets, non-farm business assets and consumer durables. It thus can be seen that saving has always been the most important source of financing investment in LIC’s. 24

Recently, there has been a growing concern that, in the absence of proper investment opportunities (Wai, 1976), the increased amount of savings is not invested in productive form. The studies on measurement of financial surpluses (Chakravarty, 1975; Kumar, et al., 1975; Desai and Desai, 1971) have revealed that the adoption of modern technology has resulted in saving which exceed investment. Thus a substantial portion of the increased saving is kept in cash by farm families. Part of the existence of financial surpluses can be attributed to the uncer tainty of production. It cannot be denied, however, that financial surpluses exist because of lack of investment opportunities.

In the literature, the surplus mobilization programs for developing countries recently have occupied a prominent position. There are two lines of arguments, which relate investment opportunity with savings.

One school of thought contends that investment opportunity has a positive effect on savings (Shultz, 1964; McKinnon, 1973; and Adams, 1973).

Another school of thought contends (Wright, 1967; Weber, 1970) that the effect of an increase in rate of return on saving is ambiguous owing to interaction of the income and substitution effects as a result of changes in rates of return on investment. It is argued that if savings are inelastic to the rates of return on deposits, then deposit rate policy need not be taken into account. The recent experience of interest rate reforms in Korea and Taiwan, however, tend to nullify the later hypothesis. Thus, surplus mobilization policies seem to be important instruments with a promise of enhancing economic growth. 25

The means of surplus mobilization policy have varied from taxation

(Gandhi, 1970; Johl, 1970) to interest incentives (Shaw, 1973). The choice of means to mobilize savings varies from one country to another.

The choice of one or combination of means also depends on the political ideology of nations. It never the less can be inferred that broadening the choice of investment opportunities will provide strength to the economic growth stimuli of farm sectors in developing countries including

India.

Conclusion

The review of literature in the preceding pages covers various aspects of capital formation at the farm level. The first component of capital formation is the existence of savings. The review amply demonstrated that irrespective of spatial, temporal and economic differences, farm families in India and other developing countries did save substantial proportions of their incomes. The studies in general do not employ uniform methodology and coverage. It is very rare that both income and asset-accounting methods are employed in the same survey.

Patterns of investment reveal that the majority of farm families prefer farm investment to other investment opportunities. This is understandable because farming is a major production activity in rural areas of developing countries. Farm investment is composed mainly of capital expenditure incurred on acquisition of land, land rights, live stock and construction of buildings. The results of the work reviewed however do not allow the comparative investment behavior of the inno vating and traditional farm families. Research on the saving-investment relationship at the farm level is scanty. Not withstanding the quantitative and spatial coverage, it can be seen that saving is a main source of financing current investment. The survey of literature also reveals that financial institutions in India are not yet providing conditions to be the

"markets" for surplus savers and surplus investors. CHAPTER III

DATA DESCRIPTION AND ORGANIZATION

This chapter is concerned with the criterion for sample selection, a description of the characteristics of sample area and farms and an explanation of the concepts and definitions used in the study. Sample

selection proceeded at four levels. The first involved selection of a 5/ district. This was followed by selection of Panchayat Samiti,— vil

lages, and finally, individual farm families for personal interviews.

Criteria for Sample Selection

Existence of irrigation facilities formed the general criterion of

purposive selection at the district, Panchayat Samiti, and village

levels. It was believed that in a dry state like Rajasthan irrigation would be a pre-condition to the capital formation process.— ^ The

choice was further narrowed by delineating only artisan well-irrigated

areas to preserve representativeness in selection at each level.— ^ The

sample farm families were selected randomly from three size groups,

5/ A district is divided into several development units called Panchayat Samitis.

6/ Personal discussion with Professor Rajkrishna, University of Delhi, Dr. M.T.R. Sarma, Director National Council of Applied Economic Research, New Delhi, and Professor V.S. Vyas, Senior Professor Indian Institute of Management, Ahemadabad, Gujarat.

7/ More than 80 percent of irrigated area in the state of Rajasthan is irrigated by artisan wells.

27 28

RAJASTHAN IN INDIA

Locations of Panchayat Samiti Girwa Udaipur District and State of Rajasthan in India

‘uqAiPuA'orsT 29 viz., small (0-4.99 acres), medium (5.00-9.99 acres) and large (10.00 acres and above) farms.

The District

The ratios of irrigated to total cultivated lands for all the 26 districts were ranked. Barring Ganganagar district which is located in the arid region — ^ and has all of its irrigated area by canal irrigation, Udaipur district had the highest irrigation ratio (40 per- . 9/ cent) .—

The district of Udaipur as it exists today, is one of the 26 dis tricts of Rajasthan (Plate I). Before merger of the princely states, it used to be territory of erstwhile Mewar state. Udaipur district is situated between 23°46' and 26°2' north latitude and 73°0' and

74035' east longitude and has an average altitude of 587 feet above sea level. Bounded on the north by Ajmer, on the east by Bhilwara and

Chittorgarh district and on the west by Pali and Sirohi districts

(Plate I), Udaipur lies partly on an elevated plateau in the north and in fertile plains on the east. The southern and western regions of the districts are mostly covered with rocks. The Aravalli hill range

8/ Krishanan (1968), on the basis of agro-climatic parameters divided the state of Rajasthan into arid (districts of Banner, Bikaner, Churu, Ganganagar, Jalore, Jaisalmer, Jhunjhunu, Jodhpur, Nagaur, Pali, Sikar, and Sirohi), semi-arid (Ajmer, Alwar, Bharatpur, Sawai Madhopur, and Tonk), and sub-humid(Bhilwara, Banswara, Bundi, Chittorgarh, Dungarpur, Jhalawar, Kota, and Udaipur) regions.

9/ These ratios for the years 1968-69 were 0.54, 0.53, 0.03, 3.18, 55.80, 10.37, 5.32, 16.00, 21.20, 12.20, 26.09, 0.02, 18.87, 29.68, 12.11, 22.80, 17.03, 20.14, 19.28, 21.65, 39.75, 26.42, 12.80, 36.47, 10.45, and 24.55 percents for the districts of Barmer, Bikaner, Jaisalmer, Jodhpur, Ganganagar, Jalore, Sikar, Jhunjhunu, Pali, Nagaur, Sirohi, Churu, Ajmer, Jaipur, Bharatpur, Alwar, Tonk, Sawai Madhopur, Kota, Bundi, Udaipur Banswara, Dungarpur, Bhilwara, Jhalawar and Chittorgarh respectively. 30

Table U. Land Use Pattern in Udaipur District (1968-6 9) (Area in '000 Hectares)

Percentage Land Use Area of Total (000 Acres)

Forests 2hk 1I4

Barren and Uncultivated 6kk 37

Cultivatable Wastes 1*31 25

Fallow Lands 75 1»

Net Area Sown 3U2 20

Total Geographic Area 1736 100

Source: District Statistical Office, Udaipur. PLATE

Location of Sample Villages in Panchayat Samiti Glrva

yc«i?u«

Lo*-• '‘"\ • ; ’*»' -flfv j u m i , \ s.w'Yr-lx. 32 enters this district near Sarara tehsil and attains a maximum of 4315 feet there. The district is surrouned by seven lakes and has a perren- IQJ ial river system as compared to the other parts of Rajasthan. The climate is moderate, with temperatures ranging from 2°C to 41° C with an average of 19.5°C and relative humidity of 65.1. The normal rain fall during an average year is 62.28 cms spread in approximately 35 days of the monsson season from June to August.

The district is divided into eighteen Panchayat Samitis (Plate I), and is composed of 3038 villages (Plate II), which include 82 percent of the total population of the district. The density of population is

215 persons per square mile according to the 1961 census. Of the total rural population, 42 percent are cultivators, nine percent landless agricultural labor, three percent engaged in household industry and one percent in trade and commerce. The remaining 45 percent of the rural population has land but they are predominantly wage earners.

The data pertaining to patterns of land use for 1968-69, the year preceeding the survey are presented in Table 4.

It can be seen from Table 4 that only 20 percent of the total area was sown to crops. An additional 29 percent had been cultivated at one time but was either in fallow (4 percent) or had been idle for at least three years (cultivable wastes - 25 percent).

10/ In state of Rajasthan only Kota and Udaipur are covered by perennial rivers. All other districts have river systems which are active for only four months during the monsoon period. 33

Table 5. Cultivator Households According to Size of Holding and Source of Acquisition in the Rural Area of Udaipur District (1960-61)

Households Engaged in Cultivation by Size of Land Holdings_____ Interest Below 5 to 15 15 Acres in Land______5 Acres______Acres_____ and Above_____Total Households

Total 301473 12576 2kkh 145U93

Percent of Total (67) (2 8) (5) (1 0 0 ) a) Acquired From Government 28121 11777 23U1 U2239

Percent of Total (6 2)(2 6) (5) (93) b) Acquired From Private Persons 831 93 10 9314

Percent of Total (2 ) (-) (-) (2 ) c) Tenancy 1521 706 93 2320

Percent of Total (3) (2 ) (-) (5)

Source: Census of India, Vol. XIX (Rajasthan) Part III, p. 1^9* 34

Table 6 . Annual Area Planted to Principal Food Crops in Udaipur District (1964-69) (Area in '000 (Hactres)

YEAR S 1964-65 1965-66 1966-67 1967-68 1968-69 Crops Total % Total % Total % Total t Total %

Maize 167 44 176 51 176 49 182 43 204 49

Wheat U6 12 35 18 32 9 52 12 51 12

Barley 31 8 28 6 22 6 3 6 9 37 9

Sugar Cane 6 2 7 2 4 1 3 1 8 2

Others 127 34 103 30 125 35 147 35 117 28

Source: District Statistical Office, Udaipur. 35

The district has over 45,000 cultivators. A majority (67 per

cent) are small farmers (below 5 acres). The medium farmers (5-15

acres) form about 28 percent and large farmers (15 acres and above)

about 7 percent of the total cultivating families reported in the

1961 census. Private transaction of lands was legally banned follow

ing amendment of the Land Reform Act in 1958. Consequently all declared

surplus lands (except from the incapacitated, minors and widow owners) were sold through government revenue authorities. The distribution

pattern of land acquisition and its allocation among cultivating

households according to holding size group is presented in Table 5.

The distribution of the land among cultivating households reveals

that most of the land was acquired irrespective of size groups from

the government.

Maize, wheat, and barley are the principal cereal crops. Under

specific soil and water conditions sugar cane, cotton, ground nut,

sesamum, chillies and root crops are also grown in Udaipur district.

The annual distribution of area under principal crops of the dis

trict is presented in Table 6 .

There does not appear to be any appreciable change in the percent

age of area under principal crops during the five year period preceed-

ing the survey. This rigidity in preference of crops could, besides

natural constraints, be attributed to the subsistence-oriented econo my of farm families, since these are mainly subsistence crops.

Despite their high profitability, commercial crops like potatoes,

cumin, groundnut, cotton, chillies and onion are restricted to larger

farms and to irrigated areas. Table 7. Extent and Inter-Crop Distribution of Irrigated Area (ha) in Udaipur District (1966-69)

Pearl Small Sugar Fruits A Year Irrigation Ratios Paddv Sorghum Millet Maize Wheat Bariev Millets Cane Cotton Vegetables Total

1966-67 Total Cultivated Area 10181 16102 655 176639 31773 27732 11376 3855 12063 76565 366699 Irrigated Area 397 >17 6 19938 27801 26822 2615 3763 7991 16596 103776 /( of Irrigated to Total Area It Reg. 1 11 87 89 21 98 66 22 28

1967-68 Total Cultivated Area 111TQ 15136 528 189550 61666 32278 28063 6090 13183 128656 666098 Irrigated Area 760 93 5 31390 35916 26825 9833 5717 9336 29111 168962 I of Irrigated to Total Area 7 1 1 17 86 83 35 96 71 23 32

1968-69 Total Cultivated Area 12053 15166 601 203671 51560 36826 66712- 8326 16326 160655 567692 Irrigated Area 1086 139 11 62863 66028 28829 1T252 76T1 10676 31706 186239 i of Irrigated to Total Area 9 1 3 21 85 78 39 91 76 20 36

Source: Preliminary Unpublished Annual Reports, Directorate of Panchayats, Governments of Rajasthan, Jaipur. 37

Depending upon rainfall variability, the irrigated area also undergoes inter-year variations and its consequent allocation between different crops (Table 7). It can be seen from Table 7 that most of

the irrigated land, despite annual fluctuations had preferential allo

cation in favor of wheat, barley, maize, and others (which includes

fruits and vegetables and commerical crops).

The Panchayat Samiti

The selection of panchayat samiti, from amongst eighteen units was done on the basis of ranking of proportion of irrigated area to total

cultivated area for the year 1968-69. Panchayat Samiti Girwa had about

30 percent of its land irrigated by wells. Other Samitis with higher

irrigation intensities could not be selected because a majority of

their irrigated areas were supplied through tanks.

Panchayat Samiti Girwa is situated northwest of Udaipur city

(Plate II). Its headquarter is 3 kms from the city and is approachable

from the Udaipur-Jaisamand road. According to Samiti records (1968—

69), the total area of Samiti is 12932 square kms. It is composed of

162 villages and is surrounded on the north by Badgaon, the west by

Jhadole, the south by Kherwara, Sarara, Salumber and the east by

Vallabhnagar and Lasadia Panchayat Samiti's (Plate I). The popula

tion of the Samiti in 1968-69 was 87029 persons out of which culti vators accounted for approximately one-third of the total population.

About two-thirds were pursuing several agricultural and non-agricul-

tural pursuits. Of the total area about one-third was sown to crops.

Over a quarter of this sown area was sown more than once. About two-

thirds of the total area was distributed among the degenerated land 38 form categories including fallows, cultivable wastes, non-agricultural land, permanent pastures, scrub forests and barren lands.

Almost all irrigated lands of this samiti are used for taking three crops a year. While during the summer season, maize, Urd, cow pea, sanhemp, groundnut, and sesamum are taken, short-lived vegetable crops like okra, cucurbits, brinjal, tomato, and colocacia are planted in the period of three months between the summer and winter seasons.

During the winter season wheat, barley, gram and mustard are the major crops. In the same season, irrigation permitting, vegetables like cauliflower, cabbage, raddish, spinach, tomato, potato and carrot are also produced. The unirrigated lands are usually allocated for rain- fed crops like maize, in the summer and gram in the winter season.

The panchayat samiti is covered by six Nyaya Panchayats^and

12/ 36 village level worker circles. — There are 66 primary schools,

10 middle schools, one high school and one community reading room.

Out of the total population of Samiti, about one-tenth are registered literate persons. There are six dispensaries, one primary health center and one veterinary dispensary. The Samiti has 27 post offices and 11 telephone connections.

The Villages

The villages selected on the basis of higher irrigation facilities were Bujra, Manwakhera, and Matoon. All the selected villages had

11/ Local judiciaries.

12/ Total panchayat samiti is divided into VLW circle constituting several villages for administrative care and efficiency of carrying out the development programs. Table 8. Characteristics of Sample Villages in Udaipur District (1968-69)

Villases S. No. Characteristics Bu.1ra Manvakhera Matoon

1 Land Area (ha) 750 1*37 765 Irrigated (ha) 518 317 51U Percent Irrigated Area to Total Area 69 73 67

2 Population Adult Population (no.) 720 L60 978 Adult Scheduled Caste Population (no.) 78 27 9b Scheduled Tribe Population (no.) 202 10 177 Literate Population (no.) 86 12 109 Total Families (no.) 126 13b 208

3 Occupational Distribution of Population (no.) Cultivators (no.) 396 251 575 Agricultural Labor (no.) 6 - 36 Mining and Quarles (no.) - 3 Household Industry (no.) 26 - 11 Manufacturing (no.) 7 - 1 Construction (no.) - 5 Trade and Commerce (no.) - 7 Transport, Storage and Communication (no.) - -- Services 3b 27 39 Nonvorkers, Disabled and Children 285 219 300

It Rainfall (mm) 585 559 660

5 Distance From Ma.1or Market (kms) 6 8 13

6 Soils ---- Brown Clay Loam —

7 Ma.lor Crops Maize. Wheat. Maize, Wheat, Maize, Whea Barley, Sugar Barley, Pulses Barley, Cane, Lucernev Giram, Sugar Pulses, Vegetables Cane Sugar Cane

8 Livestock Population (no.) Cows 210 80 270 Buffaloes 18 - 25 Bulls 1 2 b Goats - - Others 5 10 25

9 Amenities (no.) Service Cooperatives 1 1 1 Primary Schools 1 1 1 Higher Secondary Schools - - Community Centres -- Hospitals/Dispensaries 1 - 1 Veterinary Dispensaries - 1 Warehouses and Codowns . 1 2 - Grocery Shops 3 2 8 Service Shops 6 3 b

Source: Unpublished Revenue Records for Year 1968-69. 40 above 60 percent of area irrigated in 1968-69. While Bu_j ra is situated about 6 kms northwest of Udaipur city, it is connected to the city by only a dirt road. Manvakhera and Matoon are situated east of Udaipur city and are respectively 8 and 11 kms away from Udaipur city: Both villages are located on the Udaipur-Jaisamand route and thus are well- connected to the city of Udaipur (Plate II). Some .of the characteris tics of the sample villages are set out in Table 8.

The Family Units

From each of the three selected villages the families were classi fied according to three sizes of land holdings: 0.01-4.99 acres, 5.00-

9.99 acres, and 10 acres and above. All farm families were enumerated and classified in the three above mentioned size groups. From each group about 30 percent of families were randomly selected as a sample.

The total number of sample families came out to 140 from which six respondents were replaced for their lack of cooperation and continuing absence from the villages. The distribution of selected farm families from the total population of families (468) from each sample village is set out in Table 9.

The primary data on demographic, economic and social aspects were collected in a first round of interviews in April-May of 1970. These were reconfirmed in second round during the months of September and

October. The secondary data about the location and general development indicators of Udaipur district, Panchayat Samiti Girwa, and three sample villages were collected from available Tehsil, district sta tistical agencies and the 1961 census reports. Table 9. Distribution of Total and Sampled Farm Families From Three Villages of Udaipur District (1969-70)

Villages Bu.1ra Manvakhera Matoon Total Size Groups Total Number Sample Total Number Sample Total Number Sample Total Number Sample S. No. (Acres) of Families Families of Families Families of Families Families of Families Families

Small 1 (O.OI-U.9 9) 52 16 87 26 13* bo 273 82

Medium 2 (5.00-9-99) 31* 10 27 8 bo 12 101 30

Large 3 (10.00 and Above) 1»0 13 20 5 3b 10 9U 28

Total 126 39 208 39 13U 62 U68 1U0 42

Concepts Used In the Study

The definitions and concepts used to generate estimates of incomes, savings, investments, and investible surpluses are discussed in this section.

1. Farm Family Unit; A farm family is defined to include all earning and dependent members of a family which live under a common roof and have a common kitchen.

2. Operational Land Holding: Operational holding of a farm family is composed of land owned and leased in, net of land leased out during the survey period.

3. Small, Medium and Large Farm Units; On the basis of size distri bution of operational land holdings, small, medium and large farm units are defined to be respectively those who have less than five, less than ten but more or equal to five, and ten or more acres.

4. Technological Classification of Farm Units: Each farm is classi fied on the basis of the number of components of crop technology adopted. Technologies considered were extent of irrigation, use of improved seeds, fertilizer use, herbicide and fungicide usage and land improvements. Thus units reporting the usage of any one or no input usage are termed as traditional farms. Transitional farm families are those who incorporate at least two and at the most three im proved inputs in their current production processes. Finally all those families which employed at least four or more modern inputs are categorized as advanced farm families. 43

5. Head of the Farm Family; The person who made the major decisions concerning production activities is defined as head of the farm family.

6. Income Measurements: Depending on the purpose, income is measured as gross farm family income, net farm family income and net farm business income.

6.1 Gross Farm Family Income: This measure includes value of crop production (main and subsidiary), livestock product, related agricul tural produce, cash and kind labor receipts, remittance from relatives not residing in the village, returns from hiring out of farm and non farm assets, returns from financial assets, borrowings, and disposal of farm, non-farm and consumer assets during the accounting period.

6.2 Net Farm Family Income: This was computed as a difference between gross farm family income and variable production expenditures incurred on all income generating sources (Defined in 7.1).

6.3 Gross Value of Farm Produce: This is defined to include the total value of annual crop and livestock production.

6.4 Farm Business Income: This was defined as gross value of farm produce} net of real and imputed expenditures incurred on seeds, man ures and fertilizers, pesticides, fungicides, gas, oil and electricity, marketing charges for crop sales, feeds fodders and concentrates, medicine, grazing and marketing charges for livestock product sales, labor and hiring in of farm capital inputs for crop and livestock production land revenue and annual depreciation of farm capital stock.

6.5 Economic Surpluses: These constitute the difference between net farm family income (as defined in 6.2) net of current consumption expenditures (as in 7.2), and purchase of assets (as in 8.1, 8.2, 44

8.3, 8.4, and 8.5).

7. Expenditure Measurements: The expenditures were divided into variable and fixed expenses. Both variable and fixed expenditures included expenditures on production and consumption activities.

7.1 Variable Production Expenditures; This included real and imputed values of the total expenditures incurred on farm (as defined in 6.4) and non-farm business operations. The non-farm business include expenditures material, labor, and marketing charges for related and business occupations. This expenditure also included interest, pay ment on loans borrowed, rent for land and assets leased in and land revenue on own land retained for production during the accounting year under survey.

7.2 Variable Consumption Expenditures; Annual variable expenses on consumption including real and imputed costs incurred for food, edu cation, services, socio-religious occasions, gifts and charities.

8. Capital Expenditure Measurements: Capital expenditures incurred by a farm family during an accounting year were composed of investment in the farm and non-farm business, precious metals and consumer durables.

By substracting depreciation and disinvestment from each category, the net investments were computed.

8.1 Farm Investment; It is composed of real and imputed expenditure incurred in purchasing land rights, land improvements, farm tools and machinery, means of irrigation, irrigation structures, farm houses and structures, livestock, orchards, and past crop-feed inventories retained to take advantages of price fluctuations. 45 8.2 Quasl-farm Investment: This refers to real and imputed expendi tures incurred in purchasing agro-based processing units like flour mills, weaving and ginning equipment for cotton, wool, and goat hair, beekeeping and dairying equipment.

8.3 Non-farm Investment; Capital expenditures incurred by farm families to create assets which have no relation with agricultural production are defined as non-farm investment. This category is composed of real and imputed value of capital expenditure incurred by farm families on grocery shops, leather tanning, barber shops, cloth and furniture shops, pot-making and others.

8.4 Consumer Durables; Capital expenditures incurred by a farm family on kitchen utensils, electric appliances, watches, cots, bedding, clothing and others.

8.5 Financial Investment: It is composed of capital expenditures incurred by a farm family on purchases of insurance policies, provi dent fund contributions, shares of cooperative societies, deposits in small saving and banking institutions, informal deposits with shop keepers, repayment of old debts, and purchases of gold, silver and precious stones.

9. Net Worth: Net worth of a farm is defined as current value of total asset net of liabilities showing the value of the assets that would remain if the business were to be liquidated and all outside claims against the business were paid. Net worth in the present con text is defined as the difference between current value of land, live stock, farm structures, machinery, supplies, accounts receivable, non farm business, quasi-agricultural business assets, consumer durables, financial investment, gold and silver and the liabilities incurred on creation of such assets to meet social obligations.

10. Depreciation; The depreciation of the current physical assets is computed as a proportion of their current market costs over its useful life following the straight line method.

11. Saving: Depending upon the purpose at hand, saving was computed by the income (direct) as well as the asset (indirect) accounting methods.

11.1 Direct Gross Saving; Direct gross saving was defined as the difference between gross household income accrued to a farm family during an accounting period (as defined in 6.1) and variable produc tion and consumption expenses (as defined in 7.1 and 7.2) incurred by that family during an accounting year.

11.2 Direct Net Saving; Direct net saving was defined as the differ ence between gross savings (11.1) and annual depreciation (10).

11.3 Indirect Gross Saving; Indirect gross saving was defined as a sum of capital expenditure in farm and related businesses, non-farm business, consumer durables and financial investment (as defined in

8.1, 8.2, 8.3, 8.4, and 8.5) net of liabilities during an accounting year by a farm family.

11.4 Indirect Net Saving; Net indirect saving was defined as the difference between indirect gross saving (defined in 11.3) and annual depreciation (as defined in 10).

12. Annual Gross Flow Value of Past Investments: The annual gross flow-value of past investments was arrived at by dividing the market able value of an item in its present state by number of year of expected future useful life. 13. Annual Net Flow Value of Past Investments: This was arrived at by subtracting the annual straight line depreciation rate from the gross flow value of past investments (as defined in 12). CHAPTER IV

MEASUREMENT AND ANALYSIS OF SAVING

This chapter begins with a consideration of some methodological issues involved in the measurement of savings by two alternative approaches, the direct or income-account method (S^t hereafter) and the indirect or asset-account method ($2t hereafter). First a com parison between saving estimates generated from the two methods is made and an interpretation of the discrepancies noted. Gross and net propensities to save for different categories and groups of farm families are then generated.

Comparative Reconciliation of Alternative Savings Estimates

Conceptually, both, and S2t estimates of saving are supposed to yield similar results. This is principally so because differences in current household income and consumption (S^t) are reflected in the annual changes between assets and liabilities ($2^) a ^arm family during an accounting year. However, despite meticulous efforts, differences have, in the past, been attributed to several causes; the existence of non-cash components of both income and asset creation processes, uneven pricing and evalution procedures, and the lack of knowledge of depreciation (NCAER, 1962). These differences between the two estimates are also attributed to the nature of survey research where estimates of current income do not account for cumulative financial surpluses of past income that are used to finance the current

48 Table 10. Category-Wise Tests of Significant Means and Relative Dispersal on the Difference in Direct and Indirect Gross Saving Per Sample Farm Families in Udaipur District (1969-70)

Difference of Means (Rs.) Difference of Dispersion 2 Catetferi'rs and Number of Families Ranges D * ^ - S2 ) "t" Value and Significance RHCvj^ - Cv2) S. E Significance

I Ir. :-j!ne (Hs.) Yi - Lou (J*0) Below 5000.00 395.67 0.98 (N.S.)1 0.10 1.1*0 (N.S.) Y- - Medium 159) 5000.00-9999.99 - 130.76 0.1*2 (N.S.) 0.11 0.21* (N.S.) ^ * - Hi gh (^1) 10000.00 and above 322U.76 1.38 (N.S.) 0 .6 0 0.1*6 (N.S.) II Farm Si2e IAc.) Bx - Small (73) Below It.99 577.17 0.78 (N.S.) 1.68 0.5 6 (S.)3 - Medium (35) 5.00-9.99 102.15 0.10 (N.S.) 0.07 0.1*0 (N.S.) B-< - Large (3?) 10.00 and above 215.23 0.17 (N.S.) 0 .1U 0.1*8 (N.S.) I l l Age o f Family Head (Yrs,) Ax - Young (30) Below 30 1*0.61* 0.06 (N.S.) l.llt 0 .6 0 (S.) At - Medium (90) 30-55 1082.98 0.96 (N.S.) 1 .1 9 0.I16 (S.) A 3 - Old (20) Above 55 356.11 0.32 (N.S.) 0.20 0 .5 2 (S.) IV Family Size (No.) Nj - Small (Uo) Below 3 2795.**0 1.1*0 (N.S.) 1 .8 2 0.72 (N.S.) Ng - Medium (73) lt-6 102.92 O.OU (N.S.) 0.68 0.1*1* (S.) Mj - I.arge (27) Above 6 - 735.22 0.67 (N.S.) 1.02 0.62 (S.) V Villages (Hanes) Vx - Bu.lra - 599.01 1.82 (N.S.) 2.89 0.90 (N.S.) Vg - Manwakhera - 167.31* 0.22 (N.S.) 0.59 0 .3 U (S.) V 3 - Matoon - -2032.39 2 .69** 2.10 0.76 (N.S.) V I level o f Technology T x - Traditional (2o) - 38.75 0.01 (N.S.) 0.52 0 .2 8 (S.) T? - Transitional (68) - 111.56 0.26 (N.S.) 0.50 0 .2 6 (S.) Tj - Advanced (1*1*) - 89.71* 0.08 (N.S.) 0.63 0.15 (N.S.) VII All Families (1U0) - 80.01 0.08 (N.S.) 0.39 0.28 (S.) 1. :*.s. - Statistically not significant. 2. Gregory d e fin es F* CVC^-CVSg significant if it is greater than twice standard error (S.E.) of the differences between the coefficients of variation (C.V.'s) of the two estimates of saving. 1. S. - Significant difference in the dispersal of two savings. •*Statistieally significant at 5 percent probability level. 50 asset-acquisition process (Desai and Desai, 1971). Finally, there are omnipresent and varied sources of response and enumeration errors

embedded in the methodology of surveys in developing countries

(Lansing, 1969).

In order to locate the discrepancy in alternative measurements of saving per farm family, the data pertaining to both and S2t estimates of gross saving of the sample farm families were classified according to six categories. Within each of the six categories three subgroups representing intensity levels (high, medium, low) were identified. The six categories included income, size of farm, age of operator, size of family, village and levels of technological adoption. The differences in means of and S£t per farm family in each subgroup were tested for statistical significance by employing paired 't’-test following Yamne (1970). Finally, the amount of dis persal of both estimates of saving was examined for each subgroup by employing test on differences in coefficients of variation fol lowing Gregory (1970). The mean differences for each subgroup between

and S2t» *t* values and differences in coefficients of variation are presented in Table 10.

It can be seen from Table 10 that in a majority of the subgroups belonging to each of six categories, the differences in means of alternative estimates of gross saving were positive (S^t greater than

$2t)• This situation was most conspicuous in farm families with high income, with medium-aged family heads and smallest family size.

Similarly comparatively greater negative discrepancies in the two mean saving estimates were reported by sample farm families belonging 51 to Matoon village and large size family groups. An excess of S^t over S2t implies that these farm families might have retained current surplus income in cash by postponing parts of consumption and invest ment. On the other hand, excess of S2t over S^t indicates that cumulative surpluses of past years might have been used to finance the acquisition of current assets. The paired 't'-test, however, revealed that the differences between S^t and S2t were not statisti cally significant for all subgroups except sample families from the village Matoon.

The absolute differences in coefficients of variation for each subgroup were of highest order for families with high income, small » farm-size, young and medium-aged family heads, and all levels of family size, village and levels of technology adoption. Statistical tests for this difference in extent of relative dispersal were found to be significant in only a few subgroups, (medium-aged family heads,

Bujra and Matoon farm families, and advanced farm families).

It can therefore be concluded that despite their magnitudes, the discrepancies in S^t and S2t were not statistically significant. In order to establish comparative reliability of one method over another, the "reliability" tests suggested by Modgliani and Ando were conducted.

Reliability Tests for Alternative Methods for Measurement of

Saving

The reliability of either of the two estimates of saving and

$2t and their proximity of each to the true saving S*, will depend largely on the behavior of the magnitudes of differences between the 52 12/ two estimates. These tests proposed by Modgliani and Ando (1960) — rely basically on the following three postulates:

(1) The better measure of saving is one for which the relative error

(related to S*) is subjected to the smallest variability,

(2) If is the difference between Sjt and S2t> the better measures of S* would be one having the smaller product-moment with Dt (in absolute terms). Thus, if the algebraic sum of the product-moments of S^t and S2t with Dfc is positive, S2t will be preferred to S^.

Alternatively, will be preferred to S2t if the reverse is true, and

(3) The stronger correlation of a saving estimate with Dt will weaken its reliability.

For removing the income effect, the tests were run on redefined variates where Sj = and = ®2t* ^Pon emPl°yin8 the second and V V third postulates of the Modgliani-Ando hypothesis, it was revealed that (and hence S2t) was comparatively a more reliable and proxi mate estimate of true saving S* than Sjt(and hence S^t). The results of correlation coefficients r (sJt*Dp an<^ r (S2t*°t^ a-*-onS with the product moments PMS'jt and of the alternative savings for each subgroup are presented in Table 11.

The results presented in Table 11 reveal that excepting for small farm size, small and medium farm family sizes, and traditional farm family subgroups, PMS’fc> P M S ^ implying that (and hence S2t) is

12/ For details see: Modgliani, F. and A. Ando (1960): The "Permanent Income and Life Cycle: Hypothesis of Saving Behavior: Comparison and Tests. In Proceedings of the Conference on Consumption and Saving, Vol. II. ed. Irwin Friend and Robert Jones, Wharton School of Fi nance and Commerce, University of Pennsylvania, pp. 49-174. Table 11. Category-Wise Correlation and Product-Moment Reliability Tests for Alternative Measures of Saving of Farm Families in Udaipur District (1969-70).

S' D' S ’lt , D 't 2t t Categories!/ PMs' FMs' Sum of PM's't V •r ’ It 2t

I Income (Rs) *1 0.7532 -0.7551 0.2213 -0.1891 0.0322 *2 0.5M8 -0.4282 0.0258 -0.0120 0.0138 *3 0.7629 -0.1155 0 .11*08 -0.0188 0.0860 II Farm Size (Ac) 0.9551* -0.8903 0 .1*280 -0.9289* 0.2991 b2 0.21*72 -0.31*1*1 0.0235 -0.0230 0.0005 ®3 0.661*1 -0 .621*0 0.0275 -0.0250 0.0025 III Age of Family Head (Yrs) Al 0.6l91 -0.6879 0.0920 -0.0589 0.0336 A2 0.631*8 -0.7900 0.01*59 -0.01*1*9 0.0010 AJ 0.9363 -0.6158 0.3316 -0.0929 0.2387 IV Family Size (No) Ni 0.3699 -0.8053 0.1559 -0.1805* -0 .021*6 IJ2 0.5579 -0.6179 0 .0U12 -0.01*39* -0.0027 0 .1*181* -0.3012 *3 0.01*87 -0.01*33 0.0051* V Villages (Names) Vl 0.5696 -0.0«95 0.0191* -0.0092 0.0102 V2 0.7969 -0.8053 0.1203 -0.0981 0.0222 V3 0.9302 -0.6011 0.1*1*71* -0.1109 0.3365 VI Level of Technology T, 0.9779 -0.8152 0.0560 -0.2327* -0.1767 T? 0.8531* -0.9776 0.0915 -0.0569 0.031*6 T3 0.5925 -0.5517 0.5291* -o.oi*6u 0.1*830 VII All Families 0.7875 -0.3262 0.2587 -0.1875 0.0712

1/ The ranges of six categories and numbers of farm families in each sub group are the SBme as those in Table 1 excepting for samll farm size, small and medium farm family size and traditional farm families, PMs^ PMS2 implying that PMSg is a better estimate of S*.

U>Wi 54 a better estimate of true saving S*. Similarly the positive magni tudes of algebraic sums of product moments (PMSjt and PMS^) of all subgroups excepting those mentioned above indicate the qualitative

superiority of S2t over Sjt Finally, the superiority of S£t estimate over is established by its negative correlation with in all subgroups of the six categories under consideration.

Despite the superiority of S2t over S^t, the results should be accepted with some caution. This is basically so because the statis tical tools tend to make somewhat sweeping assumptions of normality in the distribution of varlates under consideration. The limitations of these techniques may tend to obscure discrepancy which stems from the residual cash income available from postponed consumption and investment. Some of the total residual can always be attributed to response and enumeration errors. Still, a major portion of this discrepancy may result from the cash hoardings by farm families which 13/ could not be estimated through interviews.— It can also be argued that small farms with large family size and traditional technology might have been left with insignificant cash in hand as a proportion of their total portfolio structures. These caveats withstanding, a step-wise regression program was employed to explore "cause-effeet" relationships between Dt and other quantifiable variates. For quanti tative attribution of Dt, a linear model of the following form was estimated by the classical least-square method.

13/ Respondents refused to divulge answers in response to this question. 55

D., = a + b. X. . + uitk (ii) tk i itk ttl where D ^ = Discrepancy between S^t and S2t for K family in period t. til X j ^ = Direct gross saving (Rs) for K farm family in period t, fcli X2tk = Indirect gross saving (Rs) for K farm family in period t, til X^tk = Gross current income (Rs) for K farm family in period t, til X^tk = Consumption expenditure (Rs) for K farm family in period t,

X ^ ^ = Net worth (Rs) for K farm family in period t, til X g ^ = Age of head of K farm family (Yrs) in period t, til X ^ ^ = Size of operational holding (acre) of K family in period t,

X g ^ = Size of K*"*1 family (no.) in period t, til Xgtk = Ratio of dependent and total family members of K family

in period t,

b^s = Regression coefficients for i = 1 - - - 9. ,

a = Intercept, and,

uitk = Random error element for family in period t.

The estimated equation was of the following form:

D . = -62.7244 + 0.9995 X** - 1.0004X** - 0.0008X„ . (0.0044) (0.0068) (0,0031)

- 0.0008X. , -0.0008X- . - 5.7267X, , - 2.2295X . (0.0010)^tlC (0.0091) (7.5589) (6.1415)/CK

+ 1.7153X-., + 1.0357X„., : R = 0.9985 (iii) (2.4434) (0.9622)

The equation revealed that the S^t and S2t were the only statis tically significant variables explaining variance in Dt. 2 The partitioning of R — the coefficient of determination following step(up)-wise regression program revealed that about 62 percent and 37 percent of the variances in "D" were explained by and S2t respectively (Appendix A). A similar result was established by "F"-test 56 and " "-coefficient computations. Considering only significant results of the equation (lii) the model can be rewritten as,

D . = -62.7244 + 0.9995X,., - 1.0004X,_, ; R2 - 0.9935 (iv) tk (0.0044)1Ck (0.0068)

According to the reduced equation it can be said that while an increment of one Rupee in estimation of caused to increase by

Rs 0.99, an increase of a Rupee in estimation of S2fc caused a decline in Dfc of Rs 1.00. It thus becomes obvious that true saving -S* should lie between these two extremes. This could be arrived at by devising an average of two saving estimates weighted by regression coefficients for S^t and S2t* In order to arrive at true saving S*, this model could be used as follows:

If Dt = -62.7244 + 0.9995Xltk - 1.0004X2tk is a true behavioral equation explaining the relationship of with and S2t» the, for

Dt = 0,

X,..- 1 0.9995X. ,- 62.7244 holds, conversely, 1.0004

1 1.0004X, .+ 62.7244 also holds. 0.9995 C

By substituting the values of individual observation of S^t and S2 t and taking a simple arithmetic mean one could arrive at true saving - S*.

This computed saving would lie between S^t and S2t which could be subjected to zero mean and constant variance tests. For the sample averages this estimate was three percent greater than S2t and three percent less than S^fck The difference between S* and S^tk could also reflect the actual cash surpluses net of measurement errors. 57 With these results and observations on reconciliation of the

issues of measurement of saving, it is now possible to explore the

saving-income relationships. This is done in the section that follows.

Propensities to Save

Aspects of the saving-income relationship have assumed far-

reaching implications since Keynes' work (1935) on income determina

tion models. This work, with its extension and modifications has

been reported by Duesenberry (1962), Friedman (1962), Houthakker

(1956), and others. In this study the major concern is to estimate

the saving capacities of difference categories of farm families. For

the purpose at hand, the average and marginal propensities to save were generated for all sample families. From the six categories

only two (farm size and level of technological adoption), each with

three groups were retained for computation of gross, net and per

capita net saving propensities. The estimates of marginal and average

propensities to save were generated by employing the Keynesian version

of the aggregate saving function of the following form:

slt =a + b ^ where, S^t = Gross saving per farm family in period 't',

= Net saving per farm family in period 't',

= Net capita saving in period 't', ~N

= Gross income per farm family in period 't1,

Ynt = Net income per farm family in period 't',

Ynt = Net per capita income in period 't', ~

a = intercept, and b = Marginal Propensity to save. Table 12. Propensities to Save for Farm Families in Udaipur District (1969-70).

Number of Estimated Coefficients^ 6 Categories^ Families APS3 Intercept MPS R2U E S.Y. I. Farm Size i) Slg. H-, 73 0.15 678.33 0.08*5 0.11 0.51* -1388.26 0.50 H2 35 0.29 0.1*3** l.*5 -1750.66 0.1*0** 0.66 1.1*7 H3 32 0.27 ii) Sin ■ H-i 73 0.2l* 201*1.38 0.02 o.ll 0.10 h 2 35 0.2 6 -1022.15 0.37** 0.57 1.1*2 H3 32 0.22 -2125.70 0.38** 0.67 1.7l* iii) Sin. H. 73 0.09 - 20.77 ' 0.10* 0.30 1.1 8 N h 2 35 0.18 265.39 0.03* 0.1*3 0.16 32 O.ll* 188.52 0 .1*1* H3 0.05* 0.39 II. Level of Technology i) Slg. T 28 0.15 736.65 0 .06* 0.19 0.1*3 Ti 68 0.19 79 0. oi* 0.11** 0,28 0.56 1*1* 0.28 1872.92 0 .1*1** 0 .1*1* 1.1*6 T3 ii) Sin. T, 28 0.23 1*97.08 0 .06* 0.20 0.25 0.11* 0.1*8 *2 68 0.23 197.01 0.33 1*1* 0.61 T3 0.12 -2393.92 0.39** 3.31* iii) Sin. Tx 28 0.15 - lU.50 0.16** 0.70 0.00 N To 68 o.or - 1*70.23 0.33** 0.1*5 A.51 hi* - 75.30 0.2 6 1.30 T3 0.19 0.05 III. All Families Slg. ll*0 0.22 51*3.16 0.17** 0.26 0.77 Sin. 1U0 0.17 - 1*85.65 0 .16** 0.1*5 0.91 Sin. lhO O.ll* - 62.21* 0.11** 0.50 0.77 N

1. Categories and sub groups are as II and VI of Table 10. 1_ 2. These are linear estimates of gross(G) and net(N) per family and per capita in family N saving models. S=a+bY where S=saving, a=intercept, and b=Marginal propensities. 3. APS is Average Propensities to save calculated at mean gross, net and per capita levels of saving of corresponding household income. 1*. R2 is coefficient of determination. y, 5. * - Statistically significant at 5 percent probability level, **- Statistically significant at 1 percent ®° probability level. 6. Income elasticity of saving at arithmetic means. 59

For computing the propensities, estimates of both S^t and S2fc were available from which was employed for this analysis. Despite the fact that S£t established its superiority over Slt, the latter was selected because of two basic reasons. First, S2fc was negatively associated with current incomes (Y S2t* Y = -0.3262) significantly showing that accumulation of past financial surpluses might have greater contribution in asset acquisition process for the year under consideration. Further, S2t was devoid of cash in hand. S^t on the other hand, had a close and significant degree of association with current income (Y S^t . Y^_ = 0.7875) and accounted for cash in hand by virtue of its very definition. The saving propensities (gross, net and net per capita) along with relevant data using are presented in Table 12.

Marginal Saving Propensities:

It can be seen from Table 12 that with an increase in the size of holdings the gross marginal propensities to save Increased from 8 per cent of gross income for small farms to 42 percent of the same for medium followed by 39 percent for large sized farms. The net pro pensities per family however ranged from 2 percent of net current income in case of small farms followed by 37 percent in medium farms and 38 percent on large farms. A small drop in the gross propensi ties for large farms and its subsequent recovery in net estimates can be attributed to the inter-group variance in annual depreciation of the assets. Thus after taking depreciation into account the net propensities revealed a direct relationship with size of operational holdings. The per capita propensities however revealed that with a 60 unit increase in per capita net incomes, small farm family members tended to save more (ten percent) followed by large (five percent) and medium farms (two percent).

According to the extent of adoption of new technology, an increase of a Rupee in gross income for advanced farm families resulted in higher gross marginal propensities to save (41 percent) followed by transitional (11 percent) and traditional (7 percent). This systema tic relationship of saving with income can be attributed to gains in current incomes due to the extent of adoption of technology which in turn augmented the capacity to save for adopters. The order of saving capacities however was slightly reversed in favor of transitional families when annual depreciation was taken into account. Net propen sity to save was thus highest (32 percent) for transitional farm families followed by advanced (25 percent) and traditional (15 percent) farm families. An almost similar trend was observed for net per capita propensities to save. It can be inferred, thus that with increases in size of farm and level of technology adoption, farm families of

Udaipur district, in general, would increase their rate of saving from increments in their incomes.

All sample families of Udaipur district saved 17 percent, 10 per cent, and 11 percent of their gross, net, and per capita current net incomes respectively during the period under'consideration.

Average Saving Propensities:

On an average, small farms saved about 11 percent of their gross income which increased to 27 percent for large and 29 percent of mdeium families. A similar pattern was discernible for net and per capita net average saving propensities. Advanced farm families on the other hand saved the highest proportions of their gross incomes (28 percent) followed by transitional (19 percent) and tra ditional families (15 percent). The trend was slightly reversed when annual depreciation was taken into account. For, transitional and traditional families saved about 25 percent and advanced families could only save about 12 percent of their net incomes respectively.

The per capita average saving rate again proved that advanced farm families members saved about 19 percent of their net per capita income followed by traditional farm families (15 percent) and transi tional families (7 percent). All sample families.saved 22 percent of their gross, 17 percent of their net and about 14 percent of their net per capita income. It can thus be inferred that increased size of farm and advancement in the adoption of new technology provide the first and necessary axiom of economic development, namely, the ability to save as a result of increased incomes.

Finally to test the stability of marginal propensities, income elasticity of saving for each group of two categories of sample farm families were computed. The data revealed that gross saving propen sities for medium and large sized farms and advanced farm families was income-elastic. Thus with a given increase in income, the marginal propensities to save for these subgroups is likely to increase.

Similarly, net saving rates, were income-elastic for medium and large farms and advanced farms. Finally it was revealed that small farms, advanced and transitional farm family members had higher potential to respond to increased incomes by saving more and thus altering the 62 existing propensity coefficients substantially.

All this is indicative of the fact that even in an average year

(1969-70), and with qualitative and quantitative constraints of the resource control and availability o*f technology farm families did save. This is contrary to the beliefs of development economists of the early post-war era who attributed zero or negative saving rates to farmers of developing countries for thier low wconomic growth. The data amply suggests that saving rates, whether gross, net, or net per capita, will have a pronounced tendency to be increased if income- augmenting crop technology is adopted.

Conclusion:

This chapter was principally devoted to the reconciliation of con ceptual problems encountered in measurement of saving. The preliminary analysis in measurement of alternative saving (S^and S2t) revealed a high level of positive discrepancy CS^t> S2fc) with high incomes, medium-aged family heads, and small family size. Negative discrepancy

Sj^.) was found to be of high order for only one village (Matoon).

This discrepancy, in general could be attributed to measurement errors and biases introduced by the subgroup of sample farm familes.

Predominance of positive discrepancy also suggested the possibility of large financial surpluses which could not be accounted for in S2fc estimate.

The insignificant statistical tests of the zero mean differences and equal distribution variances failed to justify the existence of error element in the measurement in the two estimates of saving.

The advanced tests on the lines suggested by Modgliani and Ando revealed 63 that S2t was a relatively more reliable estimate of true saving.

The propensities to save however, were estimated by employing

Sj only. The results revealed that substantial portions of gross, net and per capita incomes were saved by the sample farm families.

Finally, a general systematic and positive relationship between saving propensities and size of farm as well as level of technological adoption were observed. Having established this, it is of interest to examine the pattern of channelisation of this saving by different

farmers. The same is discussed in the chapter that follows. CHAPTER V

ANALYSIS OF INVESTMENT BEHAVIOR OF FARM FAMILIES IN UDAIPUR DISTRICT

Introduction:

The Investment decision Is Intimately linked to the consumption and production decisions at the firm household level. It Is the sur plus Income (net of production and consumption) that Is available for financing on-farm Investments, non-farm business Investments, con sumption capital, financial Investments through existing capital markets, and the creation of human capital In terms of furthering education and quality of life.

The farm family's decision to Invest in the sets of activities described above, will, to a large extent, be determined by the expected rate of return discounted by associated risk and uncertainty (Adams and Singh, 1972). In the discussion that follows total investment Is specified first in terms of farm Investment including family labor investment directly related to the farm-asset creation activity and non-monetized as well, as purchased items of expenditure on fixed assets. The second category is quasi-farm investment. This includes rural investment which derives its raw material from the agricultural production sector, but does not come directly under the scope of farm investment. The third and fourth categories of investments include

64 Table 13. Current Farm Investment of Farm Families (Hs/Family) in Udaipur District (1969-70)

Sub Croups of Farm Families Items of Traditional Transitional Advanced Expenditure New Old Total N e w Old Total Hev Old Total

Land: 2 .1k 2 .1k Ik. 71 2 0 .3h 35.05 k 5 .kk 10. k 5 55.89 - (1 .02) (0.35) (1.31) (12.31) (2.73) (1.70) (5.15) (1.9k)

Irrigation Structures:

( i) Wells 75.00 36.25 111.25 87.9k 18 .60 106.5k 171.36 21.73 192.09 (18.31) (17.31) (17.97) (7.8k) (1 1 .2 6)(8.28)(6 .k2 ) (10.71) (6 .66)

( ii) Others 10.71 0.5k 11.25 2.9k 1 .1 0 k.Ok 9.09 0.57 9.6 6 (2 .61) (0 .2 6) (1 .8 2) (0 .2 6) (0.67) (0.32) (0.3k) (0 .28) (0.3k)

Machinery and Eaulment:

( i) Tillage 1.57 7.0k 8 .6 1 2 .6 5 3.82 6 .k7 1.57 7.0U 8 .6 1 (0 .06) (3.k7) (0.30) (0 .2k) (2.31) (0 .50)(0 .06) (3.k7) (0.30)

( 11) Sowing 2 .6 8 2 .6 8 0.50 1.69 2.19 1.25 5.69 6.9k - (1 .2 8) (0.k3) (0 .0k) (1 .02) (0.17) (0.05) (2 .8 0) (0 .2k)

(iii) Irrigation 9k. 6k 8.6k 103.28 khit.05 37.65 k8l. 8k k60.8k k9.56 510.k0 (23.11) (k,13) (16.69) (39.60) (22.79) (37.kk) (17.26) (2k.k3) (17.71)

( iv) Harvesting 0.36 0.36 6 .1 0 0.71 6.8 1 9.55 9.55 (0.09) (0 .0 6) (0.5k) (0.k3) (0.53) - (k.71) (0.33)

T r a n s p o r t : _ __ 7.35 1 .1 8 8.53 0 .k6 0 .k6 -- - (0 .66) (0.71) (0 .0 6) - (0.23) (0 .02 )

Farm Houses and Structures 170.5k 83.13 253.67 226.99 5k. 17 281.16 1171.1k 7k. 8k 12k5.98 (kl.6k) (39.70) (kO.9 8) (2 0 .2k) (32.76) (21.85) (k3.85) (36.89) (k3.75) Table 13— Continued

Subgroups of Farm Families Items of Traditional Transitional Advanced Expenditure Hew Old Total Hev Old Total Nev Old Total

6 Livestock:

( i ) Hilch 17.86 17.86 68.82 _ 68.82 102.73 102.73 (U.3b) - (2.89) (6.11.) - (5.35) (3.85) - (3.56)

( ii) Draft 7.114 _ 7.11* 31.25 31.25 1*1*. 32 1*1*.32 (1.75) - (1.15) (2.79) - (2.1*3) (1.66) - (1.5**)

(ill) Heat 3.75 _ 3.75 8.97 _ 8.97 11.59 11.59 (0.92) - (0 .61) (0 .8 0) - (0.70) (0,1.3) - (o.ko)

( iv) Young Stock 22.50 _ 22.50 29.78 _ 29.78 51.59 _ 51.59 . (5.149) - (3.6U) (2.66) - (2.31) (1.93) - (1.79)

( v) Others 2.11* 2.11* 1.1*7 1.1*7 9.89 . 9.89 (0.52) - (0.35) (0.13) - (0.11) (0.37) - (0.31*)

7 Orchards: « _ _ 25.97 25.97 _ 23.00 23.00 - - - - (15.72) (2.02) - (11.33) (0 .8 0)

8 Crop Feed Inventories: 2.50 2.50 23.66 23.66 386.72 366.72 (0 .61) - (0.1*0) (2.11) - (1.81.) (11*. 1.8) - (13.1*2)

9 Non-Monetary Investment: _ 73.88 73.88 16>*.17 _ 16U .17 203.00 203.00 - 135.28) (11.91*) (lit. 61.) - (12.76) (7.60) - (7.01*)

10 Total Gross Farm Investment Per Family: 1*09.57 209.U0 618.97 1121.35 165.23 1286.58 2670.53 202.89 2872.1*2 (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) 1100.00)

11 Disinvestment; - - 88.50 - - 1*19.1*0 - - 257.68

12 Depreciation: -- 301*. 60 - - 391* .71* - - 956.21

13 Het Farm Investment Fer Farm Family: “ 225.87 ■ 1*72.1*1* “ - 1658.53

Figures in parentheses denote the percent contribution of eacn lten of investment. 67 expenditures on non-farm business investment and consumer durables.

Finally, the last avenue of investment is composed of institutional and non-institutional financial investment.

1. Structure of Investment:

(i) Farm Investment:

The data reported on items of current farm capital expenditure, including first purchases (new), major repairs, and replacements of existing farm assets, were classified for traditional, transitional and advanced sample families. The same are presented in Table 13.

It can be seen from the data presented in Table 13 that the total farm investment varied directly with levels of crop technology adoption. Gross farm investment was minimum for traditional farm families (about Rs 600.00 per family). This amount more than doubled and quadrupled for transitional and advanced families. New investment was the principal form of Investment for all groups of sample families.

The proportion of investment for replenishment of past capital stock, however, was inversely related with level of technology adoption. For example, with traditional families, it accounted for 34 percent of total farm investment as compared with only 13 percent and nine per cent for transitional and advanced sample families respectively. The decomposition of total gross farm investment reveals that irrespective of any groupings, all farm families preferred to invest in permanent assets like farm houses and structures, irrigation equipments, digging of wells, and livestock.

A separate estimate of the non-monetized component of asset- creation revealed a negative relationship with advancement in the 68

Table ll+. Current Non-Farm Physical Investment (Rs/Family) of Sample Families in Udaipur District (1969-70).

Items of Non-Farm Sub-Groups of Farm Families Physical Investment Traditional Transitional Advanced

1. Related Investment

( i) Premises -

( ii) Tools and Implements _

(iii) Furniture -

( iv) Others -

2. Non-Farm Physical Investment

3. Consumer Durables

( i) Furniture .0.56 (O.UU) ( ii) Kitchenware 5.18 7.09 3.50 and Utensils (U.08) (5.33) (2 .1+0 )

(iii) Machines Ik ,6k 20.15 ’ J».55 (11.50) (15.71) (3 .1 2 ) ( iv) Footwear and 107.32 100.1+6 137.81+ Clothing ‘ (8 8.U2 ) (78.32) (9fc.U8)

Figures in parenthesis denote the percent contribution of each asset category. 69 levels of technology adoption. For example, the non-monetized com ponent accounted for 12 percent and 13 percent of total gross invest ments per traditional and transitional farm families, respectively.

However, it was reduced to only 7 percent of total farm investment for advanced sample families. This systematic spread in the levels of non-monetized and monetized components of farm investment with increases in level of technology adoption reveals the increased levels of monetization for advanced families. An omission of this component

(ranging from Rs 74.00 to Rs 203 per farm family) nevertheless, could seriously underestimate the total investment.

(ii) Quasi-agricultural and non-farm investment:

Despite the fact that many sample farm families reported income streams from past non-farm investment, no capital expenditure in small-scale agro-based industries like cotton and wool ginning, dairy product-processing and bee-keeping was incurred during the year under consideration. Similarly, no expenditure on non-farm business invest ment categories like grocery shops, leather tanning and others was reported. All non-farm investment during the year under consideration was concentrated on acquisition of consumer durables, especially cloth ing (Table 14).

(iii) Financial investment:

The average capital expenditures incurred in institutional and non-institutional categories of financial investment are presented in

Table 15. This investment was directly related to the level of tech nological adoption. Further, the bulk of financial capital expendi ture for all groups was incurred on acquisition of gold and silver, 71 and loan repayments. Although these forms of investment undeniably add to the economic credibility and social "well-being" of the farm families they are incapable of adding to the current income streams in the short-run. Such non-income-generating forms accounted for about

96 percent of total financial investment for traditional, followed by advanced (about 75 percent) and transitional farm families (about 62 percent).

Income-generating financial assets in non-institutional markets like money-lending and deposits to shopkeepers was restricted only to transitional (36 percent) and advanced (17 percent) farm families.

The institutional deposits on the other hand, constituted a negligible proportion of total financial investment.

It can be inferred thus, that on the whole, the sample farm families were more inclined to create non-income producing financial assets. The non-institutional income-generating financial investment was second in preference, though restricted to advanced and transi tional families who could afford to invest their surpluses in antici pation of a steady rate of return. Finally, the institutional finan cial investment represented the least attractive form of investment to all families.

Besides investment in gold and silver, the present preference of farm families for investment in non-institutional capital markets can 14/ be attributed to the mutual interdependence of labor money exchanges—

14/ In addition to the payment of interest rates, the borrowers have to provide concessional and timely supply of their family labor at peak load periods on the farms of money lenders. They are supposed to sell their produce at concessional rates to money-lenders. Lenders, in return, provide timely and liberally, the loans without asking for the purpose. 72 between borrowers and money-lenders. This factor coupled with inade quate coverage and unattractive rates of interest on deposits of organ ized financial institutions weighed more heavily in favor of non institutionalized financial investment. The interaction of these factors results in a tendency of over-investment on available farm consumption and non-institutional financial avenues of investment— ^ by those families who are endowed with surplus-generation capacities.

Productivity of Investment:

The expected rate of return on investment is one of the most important determinants of decisions concerning creation of durable capital. Studies by Meyer and Kuh (1957), Tinbergen (1938) and

Solow (1963) show profit to be an important variable determining the actual rate of investment. Increasing attention has recently been paid to the contribution of an asset structure to the income-generating process (Kuh, 1971). It should, however, be recognized that gains on current level of income are realized jointly from the current as well as the past investment structure. These caveats withstanding, the productivity of the asset-structure for the present study was assessed by regressing the same with income.

(i) Productivity of farm investment:

For determining the productivity of farm investment, a linear model of the following form was postualted.

15/ Almost all of transitional and advanced farm families had duplicate assets to do one job. A Persian wheel, along with an electrical pump is just one example out of many such situations. where, til F B I ^ = Farm business income of k family in period t,

= Current capital expenditure on land of k family in period

X2tjc = Current capital expenditure in farm machinery and imple ments of K4"*1 family in period "t",

til = Current expenditure on farm buildings of K family in period "t", tti X^t^ = Current capital expenditure on livestock of K family in period "t",

til X^tk " Current non-monetized farm investment by K family in period "t",

X g ^ - Current value of crop-feed inventory of K4"*1 family up to period "t",

X.,^, , = Value of disinvestment of past farm investment up to 7tk-l period "t-l" by family, til Xgtk = Cumulative value of land with its improvements by K family up to period "t-l",

Xgtk ^ = Cumulative value of farm machinery and implements owned by Kt41 family up to period "t-l",

til Xiotk i = Cumulative capital expenditure on farm buildings of K family up to period "t-l", til ^lltk 1 = Cumulative capital expenditure on livestock of K family up to period "t-l",

a = intercept Table 16. Pearson Correlation Matrix Indicating Degree of Association Among Farm Business Incomes and Current Farm Asset Categories for Traditional (T^), Transitional (Tg), and Advanced (Tj) Farm Families in Ud&lpur District (1969-70)

FBlfc______X]t______Xgt______Xjt______X|jt______Xjt______Xgt______Xyt______Xgt______Xgt______X10t______Xu t

T 1 1.00 0 0

FBlt *2 1.00 0 0 1.00 0 0 T 3 T1 - 0.0 026 1.0000 1.0000 V T 2 0.2853* 1.0000 T 3 -0.1839 -0 .0503 - 0 .091*7 1.0000 T 1 1.0000 Xgt T 2 0.071*3 0.3271*** 1.0000 t 3 -0.071*7 0.2952* T1 - 0 .0660 - 0 .0>(60 -0.0659 1.0000 0.3188** 1.0000 x 3t T 2 -0.0090 -0.0077 0.7936*** -0.1223 1.0000 T 3 -0.1357 0.0301 -0.1122 1.0000 T1 -0.1271 -0.1555 xut 0.1976* -0.0912 -0.1361 0.0281 1.0000

0 .322 1»* -0.0166 0.1251 0.3676* 1.0000 T 3 -0.1001 -0.1238 - 0 .1001*- 0.1836 1.0000 T 1 0.0015

X 5t T2 -0.0285 0.2076* 0.1632 0.0031 - 0.1170 1.0000 -0.0309 0.0082 0.0390 -0.1U36 0.0821 1.0000 T 3

■ * v l Table 16— Continued

FBI* Xit x2t x3t xbt X5t V. xTt V x9t *10 * xi:

»1 -O.lbOO -0 .051b -0.13b0 -0.1390 -0.1196 -0.2261 1.0000 0.30UI** V T2 0.5576*** 0 .029b 0.0007 -0.1159 0.0692 1.0000 T3 0 .69bb*»* -0.0698 -0.075b 0.5993*** 0.3626* 0 .06 b0 1.0000

T1 -0.0020 -0.017b -0.0772 -0.035b -0.101*1 0.1662 -0.0805 1.0000 X7t *2 0.1108 0.0389 0.3751** 0.0332 0.0110 -0.01b5 -0.0688 1.0000 T3 -0.0538 -0.0091 0 .5b71*** -0.1218 0.1717 0.2bl2 -0.0725 1.0000 *1 0.0088 -0.1705 0.3121* -0.076b -0.1527 0.3720 -0.1U66 0.68b0*** 1.0000 Xflt-1 *2 O.boSl*** 0.5197*** 0.1150 0.522b*** -0.0777 0 .0 b06 0.3130** 0.1211 1.0000

T3 0.2125 -0.11*51 0.1855 0.36b2* 0.0628 -0.0393 0.2098 0.3719* 1.0000

T1 -0.0025 -0.1261* -0.0163 -0.0b58 ' -0.0b9b 0.U771** -O.ObBl -0.0200 0.2591 1.0000 X, t-1 T2 O.bo89*** 0.0258 0.0687 0.1196 0.3110** 0.0868 -0.1018 0.1335 0.2088 1.0000 *3 -0.0052 -0.1322 0.3162* -0.0296 -0.2105 0.291b* -0.0017 0.b709*» O.bBbO** 1.0000 T1 0.119b -0.1U97 -0.0129 0.2233 0.2336 0.2782 -0.2502 0.0b69 0.310b* 0.5360** 1.0000 X10t-1 *2 0.2651* 0.3822** 0 .0 b98 0.6155*** -0.0860 O.llSl 0.328b** 0.0692 0.7366*** O.lbBb 1.0000 T3 0.2805 -0.167b 0.2126 0.3626* 0.03b7 0.l6b0 0.32bl* 0.380b* 0.6531*** 0.6b27*** 1.0000 *1 -0.0b07 0.2868 0.0863 -0.0669 -O.OObl 0.377b* -0.1131 -0.3661* -0.0938 0.bb88* 0.1726 1.0000 0.370b*»* Xut-1 T2 0.0556 0.2525 0.2996* 0.2217* O.Ob73 -0.1107 0.2b01* 0.3205* 0 .2165* 0.2028* 1.0000 T3 0.0535 -0.0055 0.2239 0.0817 0.060b 0.1821 0.1b5b 0.606b*** 0.7596*** 0.6106*** 0.6980*** 1.0000

•••Significant at .1 percent probability level. ••Significant at .5 percent probability level. •Significant at 5 percent probability level. Table 17- Productivity of Pans Assets for Traditional, Transitional and Advanced Para Families of Udaipur District (1969-70)

Para Family Croups Intercept X j t k Xptk X 3 t k Xl|tk X j t k X g t k Xf t k X Bt k X 9t k Xi0t k X l l t k R2 txunber of Households)

Traditional (28) 1)091.18 -0.39 -3.76 -1.87 -17.68 -9.39 -5.77 -0.17 -0.11 -1.01 , 0.77 -0.27 0.11

Transitional (68) 683.92 1.09 -0.20 1.12»* O.UU - 1 .2 8 1).85*» 0 .0 8 0.01 . 0.57»* -o.ii)»» 0.69” 0.U7

Advanced (W)) 1)28.38 -1.26* 0.1)7 1.13*** -1.66 0.77 1 ,16»»» 0 .6 1 -o.oU 0.03 -0 .0 8 0.32 0.7k

•••Significant at 0.1 percent of probability level. ••Statistically significant at 0.5 percent probability level. •Statistically significant at 5 percent probability level.

ON 77 til bis = regression coefficients of i variable; i =

= random unexplanable error, and

k ■ 1 , 2 , 28 for traditional, 1 , 2 , ...... 68 for transi

tional, and 1, 2, ..... 44 for advanced farm families.

Before estimating the equations from the model specified above,

the pearson correlation coefficients of the specified variables for

traditional, transitional and advanced groups of sample farm families 161 were generated to test the extent of multi-collinearity.— The coefficients are set out in Table 16.

The estimated equations with their relevant coefficients are presented in table 17. The existing asset-structure of traditional farm families could not explain more than 11 percent of variance in their

farm business incomes. With increase in level of technology, the 2 coefficient of determination -R , consistently rose to 47 percent for advanced farm families. These results agree with past studies in

Rajasthan (Kalla and Vyas, 1972).

A few asset categories like current expenditures on farm buildings and crop-feed inventories (in anticipation of taking advantage of price fluctuations during any year) were significantly productive for

transitional and advanced farm families. In the case of transitional

families, past expenditures on farm machines and livestock also con

tributed significantly to explain the variances in their farm business

incomes.

16/ Johnston has pointed out that existence of multi-collinearity causes problems for prediction purposes. It can be, however, tolerated for exploration of marginal contributions of independent variables. For details, see Johnston, J. (1972), Econometric Methods, McGraw-Hill Book Company, New York, pp. 159-167. Table 18. Relative Importance of Farm-Asset Productivity in Relation to Farm Business Incomes of Traditional (T.,), Transitional (To), and Advanced (To) Farm Families of Udaipur District, (1969-70) 1

Contribution Due To: R Change in R2 'B" Coefficients "F" Ratios

1. T-i (28):

r 2 .x6 0.02 0.02 ■ 0.11 0.17 r 2x 6 .xu 0.03 0.01 ■0.27 0.92 r 2x 6 ,x1|.x10 0.05 0.02 0.32 0.79 R ^ g ,Xj| »X^q • X3 0.06 0.02 0.23 0.72

2. T2 (68) R 2 .Xf 0.17 0.17 0.36 11.11 R 2X X6 0.29 0.12 0.35 8.01 0.39 0.10 0.26 U.97 r 2x 9>9>}x 6,x h r 2x 9 ,x6 ,xi:l.x3 0 .1*2 0.03 0.31 1*.83 0.01 r 2x 9 ’X6 ’X11’X3 ’X10 0.1*3 -0.27 2.73 r 2x 9 ,x6 ,x1 1 ,x3 ,x1 0 .x1 0 .U5 0.02 0.16 1.19 R2x 9 fx6,x11#x3,x10,x1.x5 0.U6 0.01 -0.09 0.70

3. T (M*): R 0.63 0.63 0.72 2U.20 r 2x 3 .x6 0.70 0.07 0.35 8.58 R x3 ,x6 ,xx 0.71 0.01 -0.15 1.85 R % 3>X6>Xi.X8 0.72 0.01 -0.18 1.10 R2X 3 ,X6 ,X1 ,X8 .Xt 0.73 0.01 0.05 0.11

1*. All Families (lUo): r2x 3 0.33 0.33 0.U2 18.97 r 2x 3 .x6 0.37 o.oi* 0.26 8.1*2 r2x 3 ,x6 .x9 0.38 0.01 0.10 0.90 -3 00 In order Co isolate the individual productivity contribution of each farm-asset category, the coefficient of determination attribut able to each farm-asset category was partitioned by employing a step

(up)-wise regression program. The results of the same along with "ft" coefficients and "F" statistics are set out in Table 18. In the case of advanced farm families the current expenditure on farm structures along with crop-feed inventories accounted for almost all explanable variance in their farm business incomes. Transitional farm family business incomes on the other hand were significantly explained by past investments in farm machinery, crop-feed inventories and live- 2 stock. Finally, commensurate with the low R , no asset category was productive in explanation of variances in the farm business incomes of traditional farm families. When combined for all families, the invest ment categories could explain a little over 38 percent of variance in their farm business incomes. Here also significant contribution was made by farm buildings and crop-feed inventories.

(ii) Productivity of non-farm investment:

Although investment in non-agricultural pursuits is potentially an important income-generating proposition, no capital expenditures

in either new acquisitions or major replenishments were reported by

farm families. So, the current average net values of service flows of past business investment were employed to estimate productivity of non-farm investment. The source-wise distribution of net non-agri-

cultural income, the servlce-flow value of past investment in non

farm investment, and proportion of non-farm business incomes to the net value of service-flows are set out in Table 19. Table 19. Non-Farm Asset-Productivity of Farm Families in Udaipur District (1969-70)

Present Annual Value of Past Non-Agricultural Income Per Family (Rs) Investment Per Percent Returns Family in Non- Per Family From Groups and Avenues of Income From Remittance From Agricultural Non-Agr icultural Investment Investment Outside Village Total

Traditional Shops of grocery, 17.86 1*93.61* 511.50 131 *5 .1*2 1.3 (28) liquor, carpentry, (3.5) (96.5) (100.00) barber's, leather processing

Transitional Flour mills, tool 1130.30 1*80.29 1610.59 1988.1*1 56.8 (68) repair shops, (70.2) (2 9.8) (100.00) liquor, grain, oil, butter fat, jaggery marketing, construc tion

Advanced Cycle, liquor, 11+0.75 2111.1*3 2252.18 1333.35 10.6 (UU) construction real (6.3) (93.8) (100.00) estate business.

All Families 1*29.61* 1028.1*5 11*58.09 1555.83 27.6 (29.5) (70.5) (100.00)

Figures in parentheses are percent distributing of non-farm incomes among investment and remittance incomes.

00 o 81

It can be seen from table 19 that the bulk of non-agricultural

Incomes for traditional and advanced families came as remittances from family members residing outside the villages. For transitional fam ilies on the other hand, non-farm business Incomes In the villages constituted a majority of non-agricultural incomes (see Appendix F for source-wise distribution of incomes). Consequently the proportion of income to the net annual value of the service-flows of past invest ment was highest for transitional families (about 57 percent) followed by advanced (about 11 percent) and traditional families (about 1 per cent). This proportion of higher productivity ratio for transitional farm families is not difficult to justify. Most families belonging to this group had, in the past, incurred capital expenditures on avenues like wholesale grain marketing, flour mills, construction, furniture marts, grocery shops and like. On the whole the average rate of return per family was about 28 percent of the net value of service-flow of the non-agricultural Investments.

Propensities of Investment:

The ability, willingness, opportunity and expected rate of return are important determinants of any investment decision. The combination of these factors eventually affect the propensities to invest.

The average and marginal propensities (net) and income elasticity coefficients of the farm, non-farm and financial investment categories were arrived at by regressing the current annual net service-flow values (net of depreciation or liquidation) of farm, non-farm and financial assets, with their respective net income shares. The rele vant results are shown in Table 20. Table 20. Average and Marginal Propensities to Invest (let) and Income Elasticities of Sample Farm Families In Udaipur District (1969-70).

Type of Traditional (H»28) Transitional (H*6B) Advanced (H»ll) All Families Investment A.P. M.P. Ely A.P. M.P. Ely A.P. M.P. Ely A.P. M.P. Ely

F a r m Investment!/ 0.0872 -0.0111 -0.1308 0.2168 0.5056 2.3321 0.2938 0.0620 0.2110 0.1993 0.1851 0.9309

Son-Farm Investments/ 0.0133 0.0152 1.U286 0.5681* -0.0090 -0.0158 0.1056 -0.0121 -0 .111*6 0.2291 -0.0059 -0.0256

Financial Investment^/ 0.0990 -0.1180 -1.2222 0.2516 1.11*1*5 1*. 51*09 0.1752 1.0051 5.7369 0.1756 0.5772 3.2870

1/ The current market flov-service value of past and present values of all farm capital stock net of annual depreciation. 2/ The current market flov-Bervice value of past and present values of all non-farm Investment excluding consumer durables net of annual depreciation of all non-farm physical assets. 3/ The current market-flov value of financial assets excluding investment in gold and silver, repayment of old debts and net of current liabilities. For farm investment, average propensities to invest were directly

proportional to the extent of technology-adoption (ranging from 29 percent of farm income shares of advanced families to about 9 percent of the same for traditional families). The effect of technology adop

tion on the average non-farm and financial investment propensities, however, did not seem to imply such direct relationship. For example, the transitional families invested proportionally more of their non farm and financial income shares (about 57 and 25 percent respectively)

than advanced (about 11 and 18 percent) farm families.

The marginal propensities of investment revealed that with a unit

increment in their respective income shares, the traditional farm families would increase only their non-farm investment (by 1.5 percent).

The reluctance of adding to farm and financial investment by traditional

farm families could be attributed to their lack of access and ability

to invest in the new forms of asset-structure. With a unit increase in their respective shares, transitional farm families would invest positively on farm and financial assets (about 50 and 114 percent respectively). Similar tendencies of marginal investment propensities were discernible for advanced farm families. It thus seems certain that under the existing set of investment opportunity, while advanced and transitional farm families would tend to prefer farm and financial investment, the traditional farm families would prefer to diversify their resource-endowments on non-farm business assets. For all families aggregatively, a unit increase in financial and farm business income would cause increases in farm (19 percent) and financial (58 percent) business assets. From the magnitudes of income elasticities of different categories of investment, it can be inferred that for traditional farm families only non-farm investment would provide elastic limits indicating the possibility of expanding their non-farm business. For transitional farm families, on the other hand, the highly elastic limits are provided by farm and financial investment. Finally, only the financial invest ment would provide the possibility of expanding the financial business of advanced families. In general, excepting for financial investment the farm and non-farm business investment do not tend to increase more than proportionately to their respective income.shares for all families. The results indicate that a strong possibility of asset- substitution exists for all groups of farm families. From the mag nitudes of elasticities, a potential of substantial shifts from non-farm and farm investments to financial markets is possible.

Equilibrium in the financial surplus allocations to farm, non farm and financial investment can be achieved if the bases of invest ment opportunity in these categories are broadened enough to provide attractive rates of return and readily available investable funds.

The negative elasticity coefficients for categories of investment in each farm family group indicate that either the existing base of investment opportunity in that category of investment has reached a

"saturation point" (for advanced families), or it remains at "access- starvation point" (for traditional farm families). In both possi bilities, new investment will either lead to unnecessary additions to the already sufficient set of assets or would per force, have to be spent on accumulation of gold, silver, consumer durables and conspicuous 85 consumption. There is also a strong possibility that in such a restrictive atmosphere of investment opportunities, much of the sur pluses might be retained in cash.

Conclusion

It is thus certain from the analysis of investment structure that sample farm families invested their current financial surpluses more by durability than by productivity criterion. A major proportion of farm investment was incurred in creating tangible assets like buildings, livestock and machinery. The non-farm and financial investment accounted for a small proportion of total current investment. The emphasis in this category was for purchasing gold and silver and reducing indebtedness. Income-generating deposits in Institutional and non-institutional agencies were very small when compared to pur chase of gold and silver. Excepting traditional farm families, farm structures and crop-feed inventory contributed productively toward farm business income. The average returns to non-farm investment,

financial investment and farm investment were rather high but the marginal propensities and elasticity coefficients showed only financial investment to increase with increase in income. This situation might cause either repetitive investment in the same capital inputs, includ ing consumer durables, or accumulation of unusually high cash surpluses unproductively held under matresses or tin cans hidden in barnyards. 86

CHAPTER VI

SAVING-INVESTMENT RELATIONSHIPS AND ECONOMIC SURPLUS MOBILIZATION POLICY

Introduction;

The present chapter concerns itself with the saving-investment relationship. The farm, non-farm and financial components of the total investment potential are employed to delineate the relative preferences of the savers in the existing investment opportunities.

From the differences in savings and investment, an estimate of avail able net cash surplus discounted progressively for risk, uncertainty, and socio-religious obligations of the three groups of farm family is attempted. These surplus estimates are then used to generate net surpluses of the farm sector of Udaipur district. Finally, some policy implications for mobilizing this surplus are considered.

Saving-Investment Relationships

The predominant motive to save from current incomes stems from the need to finance the current capital expenditures in anticipation of increasing streams of future incomes. Current incomes are also saved to cover risk of agricultural production and family subsistence in case of future lean years. Assuming a relatively more stabilized agriculture in irrigated areas, the short-run motive is to invest the surpluses to increase the income-generating capacity of the savers.

It is thus important to study the materialization of total saving into Table 21, Saving Investment Relationships of Farm Families in Udaipur District (1969-70)

Average Net Saving Average Net Farm Average Non-Farm Average Financial Net Surpluses Categories of Per Farm Family Investment Per Investment Per Investment Per Per Farm Farm Families (Rs) Farm Family (Rs) Farm Family (Rs) Farm Family (Rs) Family (Rs)

Traditional 100U.25 225.87 127. 21*6.96 ¥61*728' (N=28) (100.00) (22.5) (12.7) (21*. 5) (1*0.3)

Transitional 1312.77 1*72.1*1* 128.26 507. !*8 20U.59 (N=68) (100.00) (36.0) (9.8) (38.7) (15.6)

Advanced 3133.31 1658.53 11*5.89 601.68 727.21 (N=M0 (100.00) (52.9) (U.7) (19.2) (23.2)

All Families 1816.78 '785.61 133.76 1*52.01* 1*1*5.37 (N=120) (100.00) (U3.2) (7.1*) (21*. 9) (21*.5)

Figures in parentheses are percent distribution of each investment category to the average net saving for different subgroups. 88 investment under a given set of opportunities. The average net current savings and their subsequent distribution in various components of investment are presented in Table 21.

It can be seen from Table 21 that the net amount saved per farm family was directly proportional to its extent of technology-adoption.

The rate of net saving per farm family was one-third and thrice for transitional and advanced families than traditional ones. All families, on an average, saved more than Rs 1800.00 for the year under consider ation. The bulk of saving was invested in new Investment and major repairs of existing farm capital stock. The variation in farm invest ment was also directly proportional to the amount of saving and level of technological adoption. For example, from about Rs 220.00 (23 per cent) for traditional farmers, the farm investment per family consis tently increased in both absolute and percentage terms with increases in the level of saving and technological adoption. Average non-farm investment per family in consumer durables and semi-durables was fairly constant across farm groups. Average financial investment rose from less than Rs 250.00 per traditional farm families to more than twice and short of thrice the amounts respectively for transitional and advanced sample families.

Thus irrrespective of farm group, the sample farm families invested the bulk of their current savings in farm investment followed by financial and non-farm investment. Finally, the Inter-group differ ences in non-farm and financial investment were not as sharp as that in farm investment. The Increased proportion of saving capacity realized by adoption of new technology was invested mostly in farm investment. 89

Net Investlble Surpluses

The net investlble surplus per farm family was expressed as a

residual of saving left in cash after taking into account farm, non

farm and financial investments. Perusal of Table 21 reveals that net

investlble surpluses did not vary directly with the levels of saving

and technology adoption. The lowest surplus (Rs 205.00) was dis

cernible for transitional families followed by about double the amount

for traditional and a little more than double for advanced families.

Proportionately, the largest amount of net surplus was accruable to traditional (40 percent) families followed by their advanced (23 per cent) and transitional counterparts (16 percent).

The inter-group differences in the net surpluses may stem from

the extent of technology adoption. For example, advanced farm families hold the highest amount of net cash surpluses. It is possible that they have reached a saturation point where the untapped options of

investing the surpluses are fewer. Alternatively transitional farm

families are beginning the investment process in new technology and

thus may find many attractive alternatives. Traditional farm families, on the other hand, have low income and for various reasons have not embraced new technology. They may prefer greater liquidity of their limited surpluses to cover risk and uncertainty in their production performances and consumption requirements. The relative reluctance of

these families may also be due to their limited access to the components of new technology (Rask and Meyer, 1972). Finally, all the families will undoubtedly maintain some level of current savings to meet future production, pricing and input contingencies. Table 22. Estimates of Investlble Surpluses for Farm Families of Udaipur District (1969-70)

Categoriesi of Farm Families Attributes of Investible Surpluses Traditional Transitional Advanced Total

Sample Families (No.) 28 68 kk 1U0

Total Families (’000 No..) 15.15 36.80 23.81 75.76

Net Surpluses Per Farm Family (Rs) UOU.28 20U.59 727.21 UU5.36

Estimated Net Surpluses for Total Farm Families* (Million Rs) 6.13 7.53 17.32 30.98

10 Percent Discounting (Million Rs) 5.52 6.78 15.59 27.89

20 Percent Discounting (Million Rs) 1+.91 6.03 13.86 2U.80

30 Percent Discounting (Million Rs) U.30 5.28 12.12 21.70

1*0 Percent Discounting (Million Rs) 3.69 U.53 10.39 18.69

50 Percent Discounting (Million Rs) 3.07 3.78 8.66 15.51

•Discounts are used to represent less favorable production years. For example a 50 percent discount will represent maximum loss of agricultural productivity.

VO o 91

Net Surpluses of the Farm Sector In Udaipur District

The data on available net surplus per sample farm family can

further be employed to calculate the estimated quantity of average net

surpluses for Udaipur district. -The total sample populations was

divided 44; 68; 28 between advanced, transitional and traditional farm

families. Assuming this sample ratio to be true for a total population

of 75,761 cultivator families (census 1971), the apportionment would

result into 23,811 advanced, 36,798 transitional and 15,152 traditional

farm families for the district of Udaipur. Expanding the sample estimates of net cash surpluses per family of Rs 404.28, Rs 204.59 and

Rs 727.21 provides a total estimate of net cash surplus for the district.

The same is presented in Table 22.

It can be seen from Table 22 that the net surpluses for the sample of advanced farm families was highest (over Rs 31,000.00) followed by

transitional and traditional (above Rs 11,000.00). All farm families of Udaipur district were estimated to have cash surpluses amounting

to over Rs 30 million during the year under consideration.

It can be argued (Adams, 1973) that the presence of such large amounts of cash liquidity with all subgroups of farm families can be attributed to the elements of risk and uncertainty associated with input and output prices, timely availability of crucial production

inputs, and variability of climatic parameters. It can also be argued

that the liquidity preference of farm families arises out of socio religious contingencies which need incurrence of cash expenditure.

These factors single or combined, might at times reduce the income

generating potential of this surplus in other activities. Assuming 92 away the effect of input subsidization and price support programs cur rently in vogue, only the climatic variability remains as a significant factor influencing risk and uncertainty in farm production. Thus, the accounting of this parameter must be made before arriving at the net cash surplus which could be mobilized without impairing the prospects of future growth and socio-economic welfare.

In the absence of time-series data emanating "cause-effeet” rela tionship between climatological parameters and productivity, the risk coefficients for discounting the net surpluses could not be calculated.

However, with the data on area, production, and productivity of princi pal crops in Udaipur district for 20 years, it was estimated that this district in the past did not lose more than 50 percent of its total productivity in the agricultural sector during the droughts (1956) and floods (1965). With this as a subjective indicator of "maximum loss," a simple sensitivity analysis was employed by using five discrete levels of discounting the investlble surpluses as a result of climato logical risk and uncertainty. Under this assumption and with 10 per cent of the surplus used to meet losses, the farm families of Udaipur district would still hold about Rs 28 million. On the other extreme, at the disaster level arising out of floods or drought the farm families of this district would reduce their cash holdings to about Rs 15 million.

Thus, the farm families of Udaipur district are expected to save a minimum of about Rs 15 million and maximum of Rs 30 million. This is an idle "liquidity pool" which remains with farm families and is economically unproductive. Besides, it gives rise to frequent anti social activities in villages. In the survey year alone about 25 93 percent of the farm families In Udaipur district reported major cases of thievery amounting to a loss of cash and ornaments worth Rs 1000.00

to Rs 15000.00. About 10 percent of the sample population reported

incidents of deliberate fires - a common practice of reprisal, to

their dwellings and farm structure resulting in major losses of crop-feed inventories and consumer-durables. Therefore, if this sur plus can be mobilized into secure, liquid and productive avenues of

Investment, the Shultzian assumption of economic rationale (1964) and

Hopper's findings (1965) of positive resource allocation efficiency would be further reconfirmed. Deposit-mobilization thus emerges as a crucial program which could fill the critical gap between savers and

investors of this district.

Alternatives for Surplus Mobilization

In the light of the findings of this study, it can be inferred

that substantial economic surpluses exist in the district of Udaipur.

Thus it can be assumed that similar economic surpluses exists in other

irrigated and high rainfall zones of India. Any policy to mobilize

these surpluses should not seriously decrease the productivity of

the agricultural sector. Gurley (1968) has surveyed surplus-mobilizing

alternatives currently practiced in LIC's. He groups these policies

into taxation of agricultural incomes, direct expropriation of farm

produce, using inflation, and development of rural financial markets

through adopting attractive rates of Interest on deposits.

The extreme measures like expropriation and deliberate intro

duction of inflation are not commensurate with the political ideology

of India. Thus the choice of surplus mobilization policy in LIC's like 94

India includes two main alternatives: taxation and voluntary surplus mobilization through attractive rates of return on deposits.

Economic rationale dictates the desirability of taxation on agricultural incomes. It is generally believed that a combination of tax on inherited wealth and land owned would go a long way in mobilizing economic surpluses (Lakadawala and Mody, 1975; Johl, 1972; and Gandhi,

1970). It should, however, be noted that taxation on the farm sector will alter the households' production, saving and investment decisions.

The effectiveness of taxation as a surplus mobilization policy will, to a large extent, depend on work-leisure substitution ratios and relative price parity of farm inputs and outputs (Alamgir, 1976). Any tax on total farm output meant for subsistence might cut into the already low standards of living. The persistence of such tax without taking into account of net marketable surplus might impair production incen tives and thus the prospects of long-run economic growth (Lewis, 1967).

A desirable tax-structure should be one whose incidence does not discourage seriously new forms of physical investment. This is only possible if the improved farm investment like land-levelling, drainage and irrigation facilities, energization of water-lifting devices are exempted from the taxation of net worth. Similarly, new forms of non farm business and financial investment in the institutional sector should also be exempted. Finally, the cost of tax collection and the possibility of political resentment of taxing away surpluses of powerful landed interests should also be taken into account before embarking on a taxation program to mobilize rural economic surpluses. Another alternative for inducing surplus mobilization is through

% use of the rural financial markets. The main advantages of this alter native are its voluntary nature and absence of adverse effects on incentives to produce, save and invest. Despite its usefulness, this alternative has not received adequate attention. Except for a few countries like Taiwan and Korea, financial deposits in most LIC's are not attractive because of concessional Interest rate policies. In most LIC's attention has been focussed on providing institutional credit at very low or negative real interest rates. Thus, substantial public money in the past two decades has been infused to provide concessionally priced credit. This has been based on the assumption that farm families in LIC's have zero or negative saving rates and thus are incapable of financing the investment. Despite this, only a small portion of the rural population has access to formal credit services. Moreover, many of the agricultural credit systems have constantly been in danger of decapitalization due to loan defaults, capital erosion due to negative real interest rate and high costs of supervision and administration (Adams, 1973).

The preoccupation of the Indian Government for improving the borrowing access of the majority of the farm population resulted in

Nationalization of fourteen commercial banks. One of the important features of the credit policy in these nationalized banks was to allow differential rates of interest on credit in favor of small farm families. In 265 districts including Udaipur district, the nominal rate of 4 percent per annum was charged on much of formal credit. On the other hand, earnings on deposits were constantly pegged at nominal rates of interest ranging from 9-11 percent per annum (Agrawala, 1975). 96

If these returns on deposits are to be compared with Karam Singh's study (1968) of Punjab moneylenders' gross nominal returns of 143 percent and net monopoly profits of only 9 percent (net of opportunity costs, costs of borrowing, and risk of default), the aversion of savers toward institutional surplus mobilization is understandable.

Assuming a 10-20 percent inflation rate over time, the deposit returns would yield negative real returns. Under these conditions the banking sector will continuously look for financial help from official Reserve

Bank debentures (Murdia and Chauhan, 1971).

A sound surplus mobilization policy should, thus, include develop ing rural financial markets. This ought to be politically palatable and an economically rational policy if two necessary corrections are met. The first of these corrections lies in following an upward shift of real rate of Interest on borrowing. Another and more important correction lies in Increasing the real rates of interests on deposits.

To add flexibility and attractiveness, the real rates of interest on deposits and credit should be related to the national rate of inflation.

If taxation is to be combined with this program, earnings from deposits should be tax-exempt. Finally, at least for irrigated areas, output price support and input subsidization programs should be gradually phased out.

It should be noted that a surplus mobilization policy for all

LIC's cannot be uniform owing to heterogenities in political, economic, social and administrative endowments. A combination of tax on wealth and conspicuous consumption with simultaneous corrections in interest rate policies might be considered in many countries, however. If, in 97 addition., fiscal and monetary reforms are made effective, there is no reason why the progressive growth of surplus mobilization allowing for security, productivity, risk and liquidity channels (Wai, 1976) could not be instrumental in providing a basic foundation of dynamic economic growth.

The financial surplus thus mobilized can make rural markets more self-financed. These surpluses can thus be progressively used to finance public sector investments like rural electrification, marketing and warehousing development, construction of roads, irrigation dams and education at a faster rate without incurring further inflation.

Conclusion

Some of the important conclusions of this chapter are as follows:

1) After taking into account all expenditures on production, consumption, investment, consumer durables and socio-religious obliga tions, the sample farm families were found to hold about one-quarter of their current savings in highly liquid forms.

2) The minimum amount of such cash surpluses net of risk and uncertainty parameters would range from 15 to 30 million Rupees annually for the district of Udaipur.

3) A combination of taxation and development of formal rural capital markets ensuring secured, comparatively productive, and continu ous returns on financial investments would go a long way toward a rational agro-development policy. CHAPTER VII

SUMMARY, CONCLUSIONS AND POLICY IMPLICATIONS

The objective of this study has been to estimate income, saving, and investment of different subgroups of farm families from Udaipur district of Rajasthan. Cross-sectional data on income, investment, saving, production and consumption were obtained on a farm-recall basis through personal interviews of 140 farm families of Udaipur district. The selection of district, Panchayat Samiti villages and farm families was done on the basis of high irrigation intensities.

Development Economists have believed that the rural sector (and thus agricultural population) in India does little saving and may even be a deficit sector. This impression has been supported by scanty empirical evidence. The present study to the contrary revealed that farm families have pronounced tendencies to save from their current incomes.

The available information on approaches to measure savings is confusing and incomplete. An attempt was made to estimate saving by employing both income and asset-accounting methods. The preliminary investigation of the two estimates of savings revealed that their significant discrepancies could be attributed to biases of families with high income, medium age of owner-operators, small size of holding and spatial variations. The paired means and variance tests however revealed that for as large a sample as was taken for this study, these

98 99 differences are statistically not significant except for farm families of one particular village (Matoon).

The reliability tests conducted on the two alternative measures of saving to further probe into the distribution of discrepancy revealed

that saving measured by employing asset-accounting method was a more reliable estimate of the true saving of farm families.

The income-generation capacity of farm families is intimately linked with the composition and productivity of assets. The existing asset-structure generated.net incomes from which on an average, 17 percent was saved during the period under study. Similarly, the net marginal propensity to save was of a high order (16 percent). The

inelastic limits of the marginal propensity however, revealed that the

relative response to save from additional increments in income beyond

the current levels might give rise to less than a proportionate increase

in the rates of saving.

The composition of new investment revealed a preference for farm

investment as compared to the other forms of physical and financial

investments. For example, of the net saving per farm family, 43 per

cent was employed for acquisition of farm investment. This was followed by financial investment (25 percent) and consumer durables (8 percent).

The remaining 24 percent of the net saving per family was retained in

cash. For the district of Udaipur, the estimated cash surplus was of

the order of Rs 30 million in 1969-70. Even with allowances for

extreme climatological adversities the cash surpluses were estimated

to not go below Rs 15 million at current prices in any given year. 1 0 0

A concerted approach to mobilize this surplus Into more productive

channels of financial investment, i.e., institutional banking and

the co-operative sector, would go a long way to perpetuate and main

tain a high level of economic growth. Suggested surplus mobilization policies were selective taxation and aggressive interest rate policies.

A breakdown of new investments revealed that farm investment was primarily concentrated on farm houses and structures, livestock and

crop-feed inventories. Consumer investment was predominantly com posed of semi-durables like clothes. Financial investment, on the other hand, was composed mainly of purchase of gold and silver orna ments, and repayment of old debts.

The existing asset structure was evaluated for its productive

contributions to the net household income per farm family. Despite

the fact that no non-farm investment was made during the year under

consideration, the present flow value of past investment generated

the highest average rate of return (23 percent). This was followed by farm investment (20 percent) and financial investment (18 percent).

However, the high and positive marginal propensities of financial

(55 percent) and farm investment (19 percent) revealed that increments

in the farm and non-farm income shares would results in substantial

new investments in these categories.

It can be concluded thus that despite the positive productivity

under existing investment opportunities, a sufficient potential for

inter and intra asset category substitution exists which could maximize

the income. For example, if the capital expenditures on gold and

silver ornaments can be diverted to more secured, liquid and productive 1 0 1

financial markets, the contribution of net financial income shares to

the net household incomes would increase. Further, the farm invest ment in land improvements, and improvements in the means of irrigation

can increasingly replace the repetitive investment in farm houses and livestock.

The results emanating from this study reveal that families of a

typically small-farm-irrigated agricultural sector have substantial saving capacities. These families however, are investment-shy and

thus end up with sizable cash surpluses. Effective surplus mobiliza tion programs by increasing the coverage and energetic competitive ness of financial intermediation would affect the surplus transfer into more enterprising investors without jeopardizing the prospects of a healthy farm investment climate. A radical change in the portfolio behavior of rural families is thus a pre-condition for stepping up investment in more profitable avenues. This will eventually acceler ate the development process in the similar regions of India where irrigation has recently been made available. When this process sets in, the problem of weak saving-investment relationships that tend to affect productivity adversely, will give way to the economically viable farm sector.

Recommendations for Further Research

The study of the capital formation processes at the farm level undertaken in this investigation provides some guidance for future research endeavors. With regard to analysis and documentation of capital formation, the cross-section data, as employed in this study, suffer from certain conceptual inadequacies. For example, saving, 1 0 2

Income, investment, consumption, net worth and many other related variates are dynamic in nature which interact continuously over time.

A 'single-shot' analysis is thus bound to have limited application.

The time-series information on individual farm families is simply not available. The problem is further compounded by the limitations of the memory-recall methods of survey. The past socio-economic events of a typical farm family are too numerous to be recalled and reported correctly by respondents. The best course, therefore, would be to resort to cross-section surveys of the same sample families for several years. To improve the reliability of the data, a small sample from the larger one selected for survey could be intensively surveyed by cost-accounting method on a continuous basis. This infor mation then can be used for checking the analytical validity of the survey data collected.

Some of the research issues on the process of farm level capital formation need more emphasis. The determinants of saving and their relative importance need to be analyzed. For example, it would be of immense academic and policy interest to determine the comparative relevance of 'permanent,' 'relative' or 'life-cycle' specifications of income to the saving behavior of traditional, transitional, and advanced farm families of the representative agro-climatic zones of

India.

The investment portfolio behavior of farm families needs more extensive understanding. For this, the current and expected rates of return on existing farm and non-farm asset-structures should be worked out. In order to determine the efficient portfolios of the farm families the expected rate of returns on the possible investment alternatives should also be explored. The investment decision is intimately linked with past savings, current incomes, borrowings, sales of the old assets, and other socio-economic variables like age of operator, net worth, size of family, earner-dependent ratios, education and size of farm. A multi-investment decision model to assign the relative importance of each factor affecting the Investment decision will be useful in understanding the investment process at the farm level.

Finally the effects of policy instruments like subsidization of inputs, interest rate changes in borrowing and deposits rates of interest, taxation, availability and access to credit and infra structural facility on saving-investment behavior of farm families need more investigation. A concerted simulation approach in this direction would help generate a balanced policy subject to the socio economic constraints prevalant in the LIC's. BIBLIOGRAPHY

Adams, D. W., T. H. Lee, and Marcia Ong, (1971), "Farm-Level Savings, Investment and Consumption in Taiwan, 1960-70," Research Note No. 9. Department of Agricultural Economics and Rural Sociology, The Ohio State University, Columbus: 1-10.

Adams, D. W. and I. J. Singh (1972), "Capital Formation and the Firm- Household Decision Making Process," Economics and Sociology, Occasional Paper No. Ill, Department of Agricultural Economics and Rural Sociology, The Ohio State University, Columbus: 1-18.

Adams, D. W. (1973), "Rural Savings and Small Farmer Credit Programs," Economics and Sociology Occasional Paper No. 129, Department of Agricultural Economics and Rural Sociology, The Ohio State University, Columbus: 1-25.

Adams, D. W. (1973), "The Case for Voluntary Savings Mobilization: Why Rural Capital Markets Flounder," Spring Review, Agency for International Development, Washington, D. C., 19: 1-30.

Adams, D. W. (1976), "Mobilizing Household Savings Through Rural Financial Markets," Economics and Sociology Occasional Paper No. 256, Department of Agricultural Economics and Rural Sociology, The Ohio State University, Columbus: 1-27.

Annon. (1962), "All India Rural Household Survey Vol. I - Methodology." National Council of Applied Economic Research, Publication Division, New Delhi.

Annon. (1972), "District Hand Book of Census 1971 (Udaipur District)," Publication Division, Government of Rajasthan, Jaipur: 1-328.

Annon. (1970), "A Planning Commission Report on Application of High Yielding Variety Program. Planning Evaluation Organization," Participant Journal, 4(4): 32-34.

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Pearson Correlation Matrix of the Discrepancy Dt and the Postulated Causative Variables for Farm Families' of Udaipur District (1969-70)

^t xxt x2t X3t xut x5t X6t X?t x8t X9t

1.0000

xi 0.7875* 1.0000 - 0. 3262* 1.0000 X2 0.321+5* 0.2321 0. 5816* 1.0000 X3 0.5356* x k -0.11+63 0.2036 0.5371* 0.5196* 1.0000

-0.3123* 0.0227 0.511+8* 0.1+087* 0.7131* 1.C000 X5

x6 -0.0628 0.15UU 0.3305* 0.275^* 0.5650* 0.31+18* 1.0000 -0.0231 0.0901+ 0.1750 0.1966 0.2323 0.2U91+* 0.1781 1.0000 X7 0.1228 ' x8 0.0135 0.0929 0.1120 0.2133 0.1521+ 0.3383* 0.1+260* 1.0000 x9 - 0.1222 - 0.0898 0 .051+7 0.0660 0.003*+ 0.06U2 -0.0729 0.2575* -0.25I+3 1.0000

N = ll+0 •Significant at 1 percent probability level APPENDIX B

Relative Contribution of Variates in Explaining the Variance of Discrepancy Dt for the Sample Farm Families of Udaipur District (1969-70)

S. No/Step Contribution Due to Added Contribution •F* Computed 'B' - Coefficient

1 0.6202 502ll*.2M** 0.9995

2 A ± • x2 0.3783 21701.61** -0.61*99

3 R2X2 , X2 • X9 0.0001 1 .1 6 0.001*2

b r2x1s x2 , x9 • x6 0.0001 0.57 -0.0032

5 r2x19 x2, x9> x6 • XQ 0.0001 0.1*9 0.0030

6 r2x19 x2 , x9, x6, x8 • x7 0.0000 0.13 -0.0015

7 R2X1s X2 , X9 , X6, Xg, X7 • Xu 0.0000 0.09 0.0017

8 R2x19 X2, x9, x6> Xq, X7 , • x3 0.0000 0.06 -0.0012

9 R2X19 X2, X9 , x6 , X q , X7 , Xk, X5 • X5 0 . 0 0 0 0 0.01 -0 .000U

** Significant at 0.001 percent probability level. 112

APPENDIX C

Number of Families Reporting Investment in Udaipur District (1969-70)

Traditional Transitional Advanced Total Particulars. (N=28)______(N=l)b)______(N=frl»)______(H=BP)

I Famlnvestment 1 Land (a)Purchase - 1 ( 1.5 ) 1 ( 2.3 ) 2 ( l.lt ) (b) Improvement 3( 10.7 ) 17 ( 2 5.0 0 ) 6 ( 13.6 ) 2 6( 1 8 .6 ) 2 Irrigation Structures (a) Wells ( i) Digging 2 ( 7.1 ) 11 ( 1 6 .2 ) 7( 15.9 ) 20 ( lit.3 ) ( ii) Repairs 5( 17.9 ) 1 0 ( lit.7 ) 6( 13.6 ) 21 ( 1 5 .0 ) (b) Others ( i) Digging _ 2 ( 2.9 ) K 2.3 ) 3( 2 .1 ) ( ii) Repairs K 3.6 ) 1 ( 1.5 ) l( 2.3 ) 3( 2 .1 ) 3 Machinery and Implements (a) Modern ( i) Tillage New K 2.3 ) 1 ( 0.7 ) Repairs - 3( i* .Ui) K 2.3 ) 1*{ 2.9 ) ( ii) Sowing New _ —. K 2.3 ) 1 ( 0.7 ) Repairs - - 2 ( It.5 ) 2 ( 1 .1* ) (iii) Irrigation New 2 ( 7.1 ) i M 2 0 .6 ) 2 0 ( >t5.5 ) 36( 25.7 ) Repairs - 17 ( 25.0 ) 21 ( lt7.7 ) 38( 27.1 > ( iv) Harvesting New K 3.6 ) K 1 . 1*7) 2 ( 1 .1* ) Repairs - - 2 ( It.5 ) 2 ( 1 .1* ) (b) Traditional ( i) Tillage New 3( 10.7 ) 7( 10.3 ) 3( 6 .8 ) 13 ( 9.3 ) Repairs 3( 10.7 ) 5( 7.3 ) 5( ll.lt ) 13( 9.3 ) ( ii) Sowing New 3( l*.l* ) 2 ( It.5 ) 5( 3.6 ) Repairs 3( 10.7 ) 3( U. It ) 2 ( It,5 ) 8( 5.7 ) (111) Irrigation New 2 ( 7.1 ) 2 ( 2.9 ) 2 ( It.5 ) 6( It.3 ) Repairs 6( 2 1 .1* ) 7( 10.3 ) - 13( 9.3 ) ( iv) Harvesting New 2( 2.9 ) _ 2 ( l.lt ) Repairs l( 3.6 )- 1 ( 0.7 ) 1* Means of Transport (a) Traditional New l( 1.5 ) 1 ( 0.7 ) Repairs - 2( 2.9 ) 1 ( 2.3 ) 3( 2.1 ) (b) Modern New —— — Repairs 113

APPENDIX C-Continued

Traditional Transitional Advanced Total Particulars (N=28) (n =i*i* ) (N=l*l*) (N=ll*0)

5 Farm Houses and Structures (a) Modern New 2( 7.1 ) 1 1 ( 1 6 .2 ) 1 2 ( 27.3 ) 25 17.9 ) Repairs 3( 10.7 ) 1 1 ( 1 6 .2 ) 7( 15.9 ) 21 1 5 -0 ) IT)) Traditional New - 2 ( 2.9 ) 1( 2.3 ) 3 2 .1 ) Repair 15( 53.6 ) 1*0( 58.8 ) 28( 63.6 ) 83 59.3 ) 6 Livestock (a) Milch 3( 10.7 ) 1 6( 23.5 ) 13( 29-5- ) 32 22.9 ) (b) Working 1( 3.6 ) 6( 8 .8 ) >*( 9.1 ) 11 7.9 ) (c) Meat --- - (d) Young stock 13{ U6.h ) 1*1*( 6U.7 ) 32( 72.7 ) 89 56.l* ) (e) Others 1< 3.6 ) 3( U.l+l) 7( 15.9 ) 11 7.9 ) 7 Orchards la) New ---- (h) Improvement -- - - 8 Crop Feed Inventory K 3.6 ) 20( 29.1* ) 23( 52.3 ) 1*1* 31.1* ) 9 Non-monetized Investment 1 8( 6U.3 ) 65( 95.6 ) 1*0( 90.9 ) 123 87.9 ) 10 Total Farm (Gross) Investment 28(1 0 0 .0 0 ) 68(1 0 0.0 0 ) l*l*(10 0.0 0 ) 11*0 100.0 0 ) 11 Disinvestment 13( 1*6.U ) 38 ( 55.9 ) 26( 50.1 ) 77 55.0 ) 12 Net Farm Investment 28(1 0 0 .0 0 ) 68(1 0 0 .0 0 ) 1*1*(10 0.0 0 ) ll*0 100.0 0 ) Q u a Bi-farm Investment ( i) Premises - - - ( ii) Tools and Implements - 1( 1.5 ) - 1 0.7 ) (ill) Furniture 1( 3.6 ) 1( 1.5 ) - g 1 .1* ) Non-farm Investment 2( 7.1 ) 1( 1.5 ) 1( 2.3 ) 1* 2.9 ) Consumer Durables 3( 10.7 9( 20.1* ) 17.9 ( i) Furniture ) 13( 19.1 ) 25 ) 16( 57.1 ) 27( 39.7 ) 9( 1*3.2 ) 62 1*1*.3 ) ( ii) Kitchen Utensils and Utility Ware 8( 2 8 .6 ) 28( 1*1 .2 ) 11( 25.0 ) 1*7 33.6 ) (ill) Machines 2 8(1 0 0 .0 0 ) 66( 97.1 ) 1*1*(100.0 0 ) 138 99.6 ) I iv) Semi-durables 3( 10.7 ) 60( 8 8 .2 ) 1*1*(10 0.0 0) 107 76.1*3) Financial Investment APPENDIX D

Source-Wise Heti/ Income Per Farm Family in Udaipur District (1969-70)

Farm Family Farm Business Income (Rs) Non-Fa™ Business^/ Ret Remittances^/ Financial Income^ Disinvestment^/ Total Ret Income (Rs) Groups Product Selling Wages Income (Rs) (Rs) (Rs) (Rs)

Traditional (H - 2 6) 972.61* 1617.61 17.86 1*93.61* 199.09 88.50 3389.31*

Transitional (H - 6 8) 15U8.71* 630.1*3 1130.30 • 1*80.29 733.83 1*19.1*0 1*91*2.99

Advanced (H ■ U.) 56U1.69 - 11*0.75 2111.1*3 791.27 257.68 89I12.82

All Families (H ■ 11*0 ) 2721.02 7U9-35 U2 9.6b 1028.1*5 571*. 73 255.19 5758.38

1/ Bet of annual depreciation and variable production expenditures. 2/ Includes wage and product selling income both. 3/ Remittances net of farm produce transfers to fsmlly remlters and borrowing. 5/ Returns from financial assets. Sale value of assets net of expenditures in affecting the disinvestment decision. APPKNDEC Z

Source-Wise Distribution Distribution of Net Consumption and Capital Expenditures Per Farm Family in Udaipur District 11969-70)

Farm Family Consumption i/ Consumer 2/ Non-Farm Business!/ Quasi-Agrlculturalii/ Farm 5/ Financial Saving y Net Financial Groups (Rs) Durables (Rs) Investment IRs) Investment (Rs) Investment(Rs) Investment(Rs) (Rs) Surpluses(Rs)

Traditional (I - 2 8) 2385.09 127.1*» 225.87 21)6.96 IOOU.25 ltOU.38

Transitional (H - 6 8) 3630.22 128.26 -- U72.ltU 507. >)8 1312.77 20U.59

Advanced (H - l*U) 5609.51 1U5.90 - - 1668.53 601.68 3133.31 717.21

All Families (I - lUO) 39U1.50 133.80 - - 788.95 U52.01 1816.78 1)1)2 .0 6

1J Own produce and purchased items. 2/ let of Annual Depreciation. 3/ let or Annual Depreciation. */ Net of Annual Depreciation. 5/ let of Annual Depreciation. X] Net of Annual Depreciation and production expenditure.