AGRI-SPENDING IN INDIA          

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Context

• While the overall budgetary allocation towards the agricultural sector has marginally increased by 4.4% in the Union Budget 2022-23, the rate of increase is lower than the current inflation rate of 5.5%-6%.

Some statistics and concerns

FAO and UN Report

• The Food and Agriculture Organization (FAO) of the United Nations (UN) report for 2001 to 2019 shows that, globally, India is among the top 10 countries in terms of government spending in agriculture, constituting a share of around 7.3% of its total government expenditure.
• However, India lags behind several low-income countries such as Malawi (18%), Mali (12.4%), Bhutan (12%), Nepal (8%), as well as upper middle-income countries such as Guyana (10.3%) and China (9.6%).

Agriculture Orientation Index (AOI)

India

• India’s AOI index is one of the lowest, reflecting that the spending towards the agricultural sector is not commensurate with the sector’s contribution towards GDP.
• India holds only the 38th rank in the world, despite being an agrarian economy wherein a huge population is dependent on the agricultural sector for its livelihood, and despite being among the largest producers of several crops produced and consumed in the world.
• India’s AOI is one of the lowest in Asia and among several other middle-income and upper-income countries.

Other countries

• China has been doing remarkably well with an index steadily improving and crossing one.
• Similarly, in countries such as the Republic of Korea, the value of AOI has been greater than one and greater than two since 2005-06 respectively.
• Even lower income African countries such as Zambia, have commendable spending in the agricultural sector despite being a landlocked country.

AOI Index Agriculture Orientation Index (AOI) is an index which was developed as part of the Goal 2 (Zero Hunger) of the 2030 Agenda for Sustainable Development in 2015. The Sustainable Development Goal (SDG) 2 emphasizes an increase in investment in rural infrastructure, agricultural research and extension services, development of technology to enhance agricultural productivity and eradication of poverty in middle- and lower-income countries. The AOI is calculated by dividing the agriculture share of government expenditure by the agriculture value added share of GDP. In other words, it measures the ratio between government spending towards the agricultural sector and the sector’s contribution to GDP.

 

Various Schemes

• Pradhan Mantra Annadata Aay SanraksHan Abhiyan (PM-AASHA) experienced a significant reduction to only one crore as against the allocation of Rs 400 crore in 2021-22.
• The distribution of pulses to States for welfare schemes has also been reduced to Rs 9 crore as compared to the Rs 50 crore of FY 2021-22.
• Additionally, there is an overall reduction in 718.8 crore in total central schemes/projects.
• All these may have serious implications for the performance of the sector.

Capital investment

• The capital investment in the agricultural sector is more crucial than price support programmes.
• Unfortunately, there has not been any considerable and commensurate increase in the allocation towards capital investment, especially for promotion of rural infrastructure and marketing facilities.
• Allocation for rural development was 5.59% in the previous Budget and it has been reduced to 5.23%.
• The allocation of funds towards schemes such as Pradhan Mantri Kisan Samman Nidhi (PM KISAN), Pradhan Mantri Kisan Maandhan Yojana, though desirable, will not result in long run asset generation.

Way Ahead

• Increase Government spending: The intensification in government spending towards the agricultural sector is the key to attain the sustainable development goals of higher agricultural growth and farm income.
• Develop Infrastructure: The focus on development of irrigation facilities, urban infrastructure and development of national highways must be complemented with an emphasis on the development of rural infrastructure and rural transportation facilities.
• Increase in number of Markets: There should be an increase in the number of markets, as suggested by the National Commission on Farmers.

Final thought

• These measures will play a crucial role in enhancing farmers’ access to markets and integrating small and marginal farmers into the agricultural supply chain to a greater extent.

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