19 April 2021
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Performance of agriculture sector in times of pandemic
The impact of COVID-19 pandemic has been felt across all the sectors of the economy and agriculture is no exception. However, resilience of agriculture sector can be seen from the fact that it contributed positively to the total Gross Value Added (GVA) in both the first and second quarters of the FY 2020-21, even when the services, manufacturing and construction sectors of the economy contracted massively (Economic Survey, 2020-21, p-22). The sector remained the silver lining during India’s worst economic crisis that erupted with the COVID-19 pandemic.
Given that agriculture is the backbone of the Indian economy, it is expected that the government (both the Union and States) would take concerted efforts to achieve desired levels of growth from the sector. In this context, public expenditure plays crucial role, however, the framework of public expenditure should be appropriate. For instance, prioritising public expenditure on core interventions [1] in the agriculture sector not only creates jobs for the majority and ensures growth through backward and forward linkages, but also reduces income inequality in the countryside. Similalry, full utilisation of available funds under these core interventions can have multiplier effects and make the sector sustainable and viable.
Shifting priority of budgetary allocation within the sector
When it comes to public provisioning in this sector, India’s experience has been quite dismal. Share of budgetary allocation on core interventions, out of the total budget for the sector in the Union budgets, has been reduced substantially over the years. Union government’s budgetary allocation on core interventions used to be 56 per cent in 2015-16. It declined to 42 per cent in 2016-17, and further to 20 per cent in 2018-19, and has remained more or less at this level thereafter. On the other end, allocations for interventions like direct cash transfers, which do not have any substantive bearing on the infrastructure development in the sector, have registered a manifold increase during the last couple of years.
Apart from this shift in priority of allocation, a large extent of under-utilisation of allocated funds for the sector has been noticed. Co-existence of inadequate budget for most of the core interventions, and under-utilisation of allocated funds makes the sector more vulnerable. In this backdrop, the extent of utilisation of funds released to States in one of the core interventions- Rashtriya Krishi Vikas Yojana (RKVY) has been documented here.
RKVY- a better-designed intervention, lost its importance in the present time
RKVY was launched in 2007 as a State Plan scheme with 100 per cent central assistance (funding). The focus of the scheme was on the overall development of the agriculture through incentivising States to increase public investment towards creating infrastructure and promoting income-generation activities. It provided adequate flexibility to the States to choose a segment for investment, as per local needs and agro-climatic conditions.
The scheme is now falling under CSS category with a change in funding pattern since 2015-16. The scheme has also been renamed as RKVY- Remunerative Approaches for Agriculture and Allied Sector Rejuvenation (RKVY-RAFTAAR) in 2017. Along with concerns about declining allocations over time, its performance with respect to the extent of funds utilised as a proportion of total funds released, paints a gloomy picture in recent years.
Did change in funding pattern of RKVY lead to underutilisation of funds?
To understand this, we clubbed data for 19 States of India and compiled relevant data points since 2007-08. The entire period of analysis divided into two parts, keeping in mind that the change in funding pattern must have impacted the degree of fund utilisation in the scheme. A comparison for the two periods reveals the following.
Table 1: Extent of Fund Utilisation out of the Total Funds Released under RKVY since 2007-08
| Extent of Fund Utilisation (Average) | Name of the Sates | |
| 2007-08 to 2014-15 | 2015-16 to 2019-20 | |
| 90 per cent and above | Andhra Pradesh, Bihar, Himachal Pradesh, Gujarat, Madhya Pradesh, Maharashtra, Uttar Pradesh, Chhattisgarh, Odisha, Tamil Nadu, Rajasthan, Uttarakhand, Jharkhand, Assam, Haryana, Punjab, West Bengal, Kerala and Karnataka (19) | Karnataka (1) |
| Between 80 per cent – 89 per cent | Andhra Pradesh, Himachal Pradesh, Odisha, Rajasthan, Uttar Pradesh and Uttarakhand (6) | |
| Less than 80 per cent | Bihar, Chhattisgarh, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Punjab, Tamil Nadu, West Bengal, Haryana, Assam and Jharkhand (12) | |
Source: Schemes Dashboard | Open Budgets India, Available at: https://schemes.openbudgetsindia.org/scheme/rkvy/funds-allocated; and RKVY MIS available at: https://rkvy.nic.in/index.html. Accessed on 16 April 2021.
To measure the extent of fund utilisation, the ratio has been computed by taking total funds utilised and the total funds released under the scheme. All the 19 States studied for the purpose are utilising funds in the range of 90 per cent and above during the period from 2007-08 to 2014-15, which is considered as fiscally better performed period. On the other hand, during the period 2015-16 and 2019-20, only one State, i.e. Karnataka reported utilisation of funds 90 per cent and above. Six States reported fund utilisation between 80 and 89 per cent, while 12 reported a utilisation of less than 80 per cent. This clearly indicates that – among other factors, the changed fund sharing pattern for RKVY since 2015-16 [ it is now 60 per cent for Centre and 40 per cent for States, whereas earlier it was a 100 per cent Centre funded scheme] has resulted in under-utilisation of funds.
What ails utilisation of funds in RKVY?
Under-utilisation of funds in schemes those are falling under CSS category-including RKVY since 2015-16 is due to the fact that States are stressed for resources. Following the implementation of Goods and Services Tax (GST) in 2017, most of the revenue sources (indirect taxes) of States subsumed with a uniform rate of taxation. This leads to drastic shortfall in revenue collection for which States also did not receive adequate compensation from the Center. On the expenditure side, most of the CSSs demand matching grant of 40 per cent from States due to the implementation of the recommendations of the Rationalisation of Centrally Sponsored Schemes in 2015. These two crucial policy decisions disfavoured States both in getting due share of resources from the Centre and added responsibility of discharging welfare obligations through increased matching grant. Many States, particularly the poorer ones, could not prioritise their annual budgets and contributed their share of matching grant under the scheme, which resulted in under-utilisation of funds released from the Centre. The CAG audit of RKVY flagged many reasons that could result in low levels of fund utilisation. Some of these include delays in release of funds, inefficiencies in scheme implementation, lack of scrutiny of projects, etc.
Conclusion
The shift of the government’s priorities from core to non-core interventions, which are very much in line with the vision of rationalising CSSs, will have crucial impact on the performance of agriculture sector. It seems that on both counts- reduced budget for core schemes, and underutilisation of available resources on these schemes, the agriculture sector has been the looser in getting desired benefits from the public expenditure. Unless there is a fundamental shift in the approach of public expenditure management for the agriculture sector its substance and viability will be under serious threat.
[1]Core interventions for the sector are those Centrally Sponsored Schemes (CSS), which are primarily focusing on infrastructure development and facilitating the production of outputs and growth in the sector. These interventions are Pradhan Mantri Krishi Sinchayi Yojana, Rashtriya Krishi Vikas Yojana, Blue Revolution, Green Revolution, etc., which have been strengthening the base / foundation of the agri-infrastructure and making the sector sustainable and remunerative.
The views expressed in this piece are those of the authors and don’t necessarily reflect the position of CBGA. You can reach Amit Kumar at: amit@cbgaindia.org and Nilachala Acharya at: nilachala@cbgaindia.org .