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LATEST NEWS UPDATES | Burden of farm expense has increasingly passed from Centre to states -Abhinav Surya

Burden of farm expense has increasingly passed from Centre to states -Abhinav Surya

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published Published on Apr 10, 2022   modified Modified on Apr 12, 2022

-TheFederal.com

Of the total public expenditure in agriculture, the Centre’s share fell from 50% to 37% between FY11 and FY20, while the states’ increased from 50% to 63%

Fiscal federalism and Centre-state financial relations have always been a hotly discussed topic, with sharper debates arising in recent times. The total burden of public expenditure on the Central exchequer as a share of gross domestic project (GDP) has declined over the past decade, while the burden on states’ exchequers has gone up.

An analysis of data pertaining to public expenditure by the Central and state governments from 2010-11 to 2019-20 shows that Centre-state relations have strained significantly with respect to agriculture — the sector that supports the majority of the population in India. The analysis was undertaken by the Foundation for Agrarian Studies (FAS) and led by Professor R Ramakumar from the Tata Institute of Social Sciences, Mumbai.

Falling share of the Centre

The analysis clearly shows the burden shifting away from the Union government. Of the total public expenditure in agriculture, the Centre’s share fell from 50 per cent to 37 per cent while the states’ increased from 50 per cent to 63 per cent between 2010-11 and 2019-20. In other words, while the total expenditure was shared equally between the Centre and States a decade ago, state governments are now funding nearly two-thirds of  the total agricultural expenditure in India.

The ratio of public expenditure to the output of a particular sector is a widely-used metric to assess the importance given by the government to that sector. In agriculture, this metric is measured by dividing government expenditure in agriculture by the gross value added in agriculture (or Agricultural GVA). This ratio for the Central government has declined sharply from 10 per cent to 7 per cent during the said period.

The states have been forced to compensate for this decline by increasing their ratio from 10 per cent to 12 per cent. Despite this shift in burden towards the states, the ratio for total public expenditure (that is adding Centre’s and states’ expenditures) fell from 20 per cent in 2010-11 to 19 per cent in 2019-20.

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TheFederal.com, 10 April, 2022, https://thefederal.com/analysis/burden-of-farm-expense-has-increasingly-passed-from-centre-to-states/


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