- India’s poor AOI is a stark reminder of the need to attain a key sustainable development goal of higher agri-growth
Issues with current budgetary allocation for agriculture
- Marginally increased agriculture budgetary allocation by 4.4% is lower than the current inflation rate of 5.5%-6%.
- 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%).
- Drastic slashing of funds toward important schemes such as crop insurance and minimum support price (MSP).
- For instance, allocation towards Market Intervention Scheme and Price Support Scheme is 62% less than the previous allocation.
- Allocation towards capital investment, especially for promotion of rural infrastructure and marketing facilities has not seen any considerable and commensurate increase.
What is the Agriculture Orientation Index (AOI)?
- 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.
- 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 emphasises 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.
AOI and India
- India’s AOI 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.
- 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.
- 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.