Promoting Investment in Agriculture for Increased Production and Productivity. Saifullah Syed

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      In underdeveloped agriculture, where declining soil fertility is not compensated by investments in land improvement, fertilizers and chemicals, and where the expanding labour force is not equipped with modern skills, knowledge, tools and implements, the productivity of both labour and land is bound to decline. Productivity of labour declines as more households with low labour-augmenting capital become dependent on agriculture. Combining increased amounts of labour inputs with fixed tracts of land would inevitably lead to diminishing returns to labour. Diminishing returns alone do not lead to declining productivity. Losses in soil moisture and fertility caused by environmental degradation and the depletion of nutrients from repeated cropping also cause productivity to decline. Without the application of land-augmenting capital, farm land depreciates and the productivity of the land declines, which leads to more exploitation of land and the environment. Traditional agriculture uses raw human labour combined with traditional wisdom and rudimentary forms of capital. Draught animals and unsophisticated farm implements and tools are predominant. Traditional agriculture in areas with an expanding population is an example of a situation in which there is an increasing variable factor (labour) combined with weak labour-augmentation capital and declining (rather than fixed) production factors (soil, land and other natural assets). Productivity loss is accentuated by both increasing raw labour and declining soil fertility and environmental quality.