Public expenditure on the primary sector has declined faster than its relative importance in the economy
India’s public expenditure on agriculture as a fraction of total expense fell to 9.5 per in 2019-20 from 11 per cent in 2010-11 amid a a sharp fall in the Union government’s expenditure on agriculture as a share of gross value added (GVA) by the sector, claimed a study by Foundation of Agrarian Studies (FAS).
The share of agricultural in India’s total GVA fell in this period to 17.8 per cent from 18.2 per cent, the study found. Public expenditure on agriculture thus has declined faster than agriculture’s relative importance in the economy.
The burden of public expenditure on agriculture has been transferred from the Centre to the states even as a several sections have raised concerns over an erosion in India’s federal structure.
The aim of the study was to analyse trends, patterns and composition of public spending in agriculture and rural development in India during the last decade. It assessed public budget for agriculture in India against five broad parameters:
The report, released May 20, was based on data on government (both central and states) expenditure on the agriculture sector, including crop production, livestock, fisheries, forestry, irrigation and rural development.
Within the agricultural expenditure, the major proportion of expenditure is on crop husbandry and food storage, which have seen a sharp decline in share of expenditure.
Agriculture Expenditure Ration (AER) on crop husbandry, which includes schemes on seeds, soil health, crop management, urea subsidy, etc fell to 2.8 per cent from 4.2 per cent during 2010-2019. AER, however, been increased to 2.8 per cent in 2019 from 1.2 per cent in 2017. But this rise was mostly due to expenditure on the PM-KISAN scheme for direct cash transfer to farmers.
AER is an estimate of the public spending on various sub-sectors within agriculture as a proportion of the total output generated in agriculture. The expenditure on food storage has stagnated, and on agricultural research has marginally declined.
Overall, this means that public expenditure in agriculture has moved away from support for direct production towards income support and credit-based assistance. The research also highlighted how India’s agricultural growth was historically dependent on the investments made by the public sector.
Green Revolution and increases in overall agricultural production and productivity were built on the platform of state support in terms of technology, prices, subsidies, credit and marketing. But over the longer period of reform between 1992-93 and 2010-11, agricultural growth rates slowed down as there was a weakening of public institutional support to agriculture in the 1990s and 2000s.
The study also notes that while the share of public expenditure in spheres like fertiliser subsidies have declined, it has not been supplemented by an increased share of public expenditure allocation on crop diversification.
In addition to these findings, the study also found that despite attention towards organic farming, in reality, the share of public expenditure towards environmentally sustainable agriculture has remained low and stagnant in the previous decade.
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