A study on farm level capital formation in two contrasting scenarios of agricultural development revealed that by and large capital formation was more on large and irrigated farms. The aggregate capital formation was higher in the progressive area than in less progressive area. The priority of investment was more on irrigation development. In the less progressive area, among rainfed farms, investment was more on livestock and perennial crops. The mean technical efficiency was higher in the more progressive area among all types of farms vis-à-vis less progressive area as a result of higher capital formation on productive assets.