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Capital formation accelerates the process of economic development and economic development in turn support capital formation through increased saving and investment. Presently, India with a growth rate of more than eight percent is competing with most of the developed countries of the world. Agriculture is one of the important sectors of economic development. Its production capacity enhances through capital formation. Sustainable agriculture refers to the ability of a farm to produce sufficient food, without causing irreversible damage to ecosystem health. The issue is two-fold, i.e., biophysical and socioeconomic. The use of new technologies along with government policy has changed the pattern of agricultural production. The excessive use of chemicals along with subsidies on the one hand supports the agricultural output but on the other hand its excessive use results into depletion of soil and water condition. As a result, the cost of production increases. The increasing cost and decreasing agricultural growth rate puts a question mark on the sustainability of agriculture as well as on non agricultural sectors.