Revisiting Agriculture in Sikkim’s Economy:The Need toPrioritisePublic Investment

MARINA RAI

In the age of Artificial Intelligence and Fintechs, sometimes revisiting basic and mundane issues like agriculture allow us to address surprisingly complex interdependent and contemporary economic issues. Agriculture is one such economic sector which has immensepotential to resolve multiple developmental challenges like poverty, inequality, and unemployment. As an economy develops, therole of agriculture is supposed to decline, yet in a developing country like India we observe that agriculture still has a huge significance in terms of providing employment, food security and sustaining rapid industrialization.

In case of Sikkim, if we observe the sector wise share in Sikkim’s Gross State Value Added (GSVA) (state income) in table 1, it is evident that the share of industrial sector(more than 60 percent) is dominant over the years, followed by the contribution of services sector (more than 28 percent) in the state’s economy. The share of agriculture in the state income has remained the least i.e. 8.3 percent in 2011 and 6.08 percent in 2024. However, this minimal share of agriculture in GSVA cannot be taken as a basis for trivializing its significance in the economy, as it still plays a pivotal role in generating employment.

Table 1: Sector-wise contribution in Sikkim’s Gross State Value Added (GSVA)(in percentage)

Data Source: National Accounts Statistics 2024

The percentage distribution of people working by broad industry of work in rural and urban Sikkim is depicted in Chart 1. For rural areas, 35.9 percent of the total male workforce were employed in agriculture in the year 2023-24. The proportion is even higher for women as majority (66.8 percent) of the women work force in rural Sikkim depended on agriculture. On average, agriculture provides employment to half of the rural workforce in Sikkim. In case of urban Sikkim, the services (tertiary) sector is dominant in terms of providing employment and the contribution of agriculture in creating jobs is minimal. But this data assumes greater significance in light of the Census 2011 data, which reveals that approximately 74.85% of the state's population were concentrated in rural areas. Overall, if we take both rural and urban areas, 60.4 percent of the female workforce, 27.8 percent of male work force and nearly 45 percent of the total force are employed in the agriculture sector in Sikkim.Since,nearly half of the workforce in Sikkim still depends on agriculture, the sector's importance to the overall economy is hard to ignore.

Despite its substantial contribution in generating employment, agriculture sector contributes a mere 6.1 % to the total income of Sikkim’s economy. This disparity stands as one of theprimary drivers of income inequality and poverty in Sikkim. Therefore, revitalising agricultural sector could simultaneously address various developmental challenges confronting Sikkim’s economy.

One of the best ways to boostthe growth of the agriculture sector is toprioritisepublic investment in agriculture. Public or government investment in agriculture consists of long-term expenditure on irrigation facilities, warehouses, sorting and grading units, cold storage,primary processing units, research and development in agriculture etc. Severalstudies have shown that an increase in government investment in agriculture directly boosts the agriculture sector's growth rateandalsoencourages private investment by farmers.Public investment(capital expenditure) in agriculture in Sikkim shows decline from 2011 to 2019 but it has increased in the recent times (table 2). Public investment in agriculture(narrow measure) declined from Rs 17.47 crores in 2011 to Rs 5.04 crores in 2019 and then itincreased to Rs 23.91 crores in 2023.

Table 2: Government Investment in agriculture in Sikkim (nominal figures)

Data Source: RBI-State Finances: A Study of Budgets

Any substantial increase in government investment in the agriculture sector will reapseveral benefits for the overall economy of Sikkim, some of which are discussed below.

First, it will boost the volume of agricultural production and accelerate the growth rate of the agriculture sector. It will help to overcome the problem of stagnant productivity ofagricultural crops in Sikkim.

Secondly, this increase in the growth rate of the agriculture sector will increase the income of farmers and residents of rural areas which in turn will have multiple additional impacts: i. An increase in income of the rural population will create more demand for goods and services in urban areas via the multiplier effect. Higher demand will lead to more sales in urban areas and a strong economic boost for urban area businesses. ii. Household Consumption Expenditure Survey (2023-24) shows that Sikkim has the highest monthly per capita consumption expenditure (MPCE) which is Rs. 9,377for rural area and Rs. 13,927 for urban areas.If MPCE is taken as a proxy for income, as is usually done, it is not difficult to decipher thatincome distribution is highly skewed towards urban areasin Sikkim.Currently a person in urban Sikkim spends 48.5% more than a person in rural area of Sikkim. So, higher rural income induced by higher agricultural growth has substantial potential to reduce income inequality between urban and rural areas of Sikkim. iii. Notwithstanding the fact that Sikkim has the lowest poverty rates in India, higher rural income will further reduce poverty, which is primarily concentrated in the rural areas of Sikkim.

Thirdly, higher agricultural growth and higher farmer income will disproportionately benefit rural women. As majority of agricultural workers are women, an increase in public investment in agriculture will serve as an indirect catalyst for socio-economic empowerment of rural women.

Fourthly, revival of agriculture and higher income of farming will indirectly help to address the longstanding concern about falling fertility rate in Sikkim. As studies show that agriculture is associated with a higher total fertility rate than other sectors of the economy, a demographic shift towards agrarian occupations could naturally contribute to higher fertility rates. While it may not address the multiple reasons for the falling total fertility rate which is only 1.1 (National Family Health Survey-5), higher income in farming can induce and incentivize more population to shift to agriculture, which may subsequently result in recovering the falling fertility rate. Also, any income stress-induced fall in fertility could be partially reversed by the revival of the agriculture sector and agricultural income.

As agriculture sector sustains the livelihoods of a vast majority in Sikkim, government policies prioritizing public investment in agriculture will not only revitalize agriculture and transform the agrarian economybut it will also resolve a spectrum ofpressing socio-economic and developmental challenges of Sikkim.