Step up agri-spending, boost farm incomes

Syllabus: General Studies Paper 3

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%.
• The Food and Agriculture Organization (FAO) 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%).

India’s low rank in Agriculture Orientation Index (AOI)

• It 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.
• India’s 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’s AOI is one of the lowest in Asia and among several other middle-income and upper-income countries.
  • Asia as a whole performs much better, with a relatively higher performance by Eastern Asian countries. China has been doing remarkably well with an index steadily improving and crossing one.
• Countries like Korea and even Zambia have commendable spending in the agricultural sector.
• India holds only the 38^th 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.
• High spending in these countries has reflected in their higher crop yield.
  • Within the Asian region, Eastern Asia has the highest cereal yield of 6,237 kg per hectare.
  • In China, even with an average land holding size of 0.6 hectares, which is much lower than India’s average land holding size, the performance of the sector in terms of crop yield is much higher than India.
  • For example, the cereal yield is 6,296 kg per hectare, pulses yield is 1,815 kg per hectare and vegetable crops yield is 25,546 kg per hectare in China; the corresponding figures for India are 3,282 kg, 704 kg, and 15,451 kg, respectively.

The Indian scenario

• A closer look at the budgetary allocation towards the agricultural sector shows that there has been a drastic slashing of funds toward important schemes such as crop insurance and minimum support price (MSP).
• Even with an overall increase in budgetary outlays, the allocation towards Market Intervention Scheme and Price Support Scheme (MIS-PSS) was only ₹1,500 crore. This is 62% less than the previous allocation of ₹3,959.61 crore in revised estimates (RE) of FY 2021-22.
• Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) experienced a significant reduction to only 1 crore as against the allocation of ₹400 crore in 2021-22. This scheme is important especially for pulses and oil seeds.
• Furthermore, the Distribution of pulses to States for welfare schemes has also been reduced to ₹9 crore as compared to the ₹50 crore of FY 2021-22 (revised estimates) and the allocated amount of ₹300 crore in the year 2021-22. Additionally, there is an overall reduction in ₹718.8 crore in total central schemes/projects, which may have serious implications for the performance of the sector.

Focus needed on Capital expenditure:

• While one can still argue that the capital investment in the agricultural sector is more crucial than price support programmes, 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.

Measures to implement

• 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.
• 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, along with an increase in the number of markets, as suggested by the National Commission on Farmers.

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.

The Hindu link

https://www.thehindu.com/opinion/op-ed/step-up-agri-spending-boost-farm-incomes/article38398661.ece

Question- To relieve agricultural distress, capital expenditure on agriculture is both a desirable and rewarding avenue when complemented by price support systems. Elucidate.