Bridging agricultural budgeting and inclusive growth toward sustainability: evidence from rural farmers in Deli Serdang, Indonesia

Abstract

Agricultural development is essential for promoting inclusive economic growth in rural areas, yet fiscal policies often fail to translate budget allocations into equitable outcomes. This study examines how agricultural budgeting influences inclusive growth toward sustainability through the mediating role of farmer empowerment in Deli Serdang Regency, North Sumatra. It aims to assess the direct influence of agricultural budgeting on inclusive growth, evaluate the mediating role of farmer empowerment measured through access to credit, infrastructure, and institutional participation and provide empirical insights for empowerment-based fiscal policy design. Data were collected from 110 smallholder farmers using a structured questionnaire and analyzed with Partial Least Squares Structural Equation Modeling (PLS-SEM) through SmartPLS 3.2.9. The findings show that agricultural budgeting has no significant direct effect on inclusive growth (β =0.084; p=0.228). However, it strongly enhances farmer empowerment (β=0.946; p< 0.001), which subsequently improves inclusive growth (β=0.918; p<0.001). The indirect effect (β=0.869) confirms a partial mediation, accounting for 52% of the total effect. The model explains 99.6% of the variance in inclusive growth (R2=0.996). The study concludes that farmer empowerment acts as the mechanism that transforms fiscal resources into inclusive outcomes, emphasizing the importance of empowerment-oriented agricultural budgeting to achieve sustainable and inclusive development.