Capital formation in fisheries sector in India: trends, compositional changes and potential implications for sustainable development

Abstract

This paper analyses the trends in capital formation in fisheries sub-sector and the responsiveness of fisheries sector to capital formation during the period of 1990-91 to 2014-15. We find structural breaks in capital formation, coinciding with policy changes. There has been a deceleration in capital formation immediate post-liberalisation. The share of fisheries sub-sector in agricultural gross domestic product (GDP) has gradually increased, from 4.3 % in 1994-95 to 5.4% in 2014-15. Correspondingly, the share of fisheries sub-sector in gross fixed capital formation (GFCF) in agricultural sector has increased from 3.4% to 9.7%. However, the efficiency of investment in the fisheries sub-sector has declined; the incremental capital output ratio (ICOR) has increased from 3.2 to 8.3 during this period. The fast decline of the efficiency of capital can be attributed to over-capitalisation of some segments of this sub-sector, particularly marine fisheries characterised by a large number of mechanised fishing vessels. The public capital formation in fisheries as a share of the total pubic capital formation is very low. Inland fisheries also face sustainability issues in terms of environmental degradation. Improving the capital productivity warrants implementation of norms of sustainable fisheries. This requires prioritization of segments for capital infusion and prioritization of geographical locations.