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2018 Post-Budget Reflections: Sending The Right Signals

Since the last few years, public discourse on Indian agriculture has been gripped by pessimism. Farm and rural distress are terms that are discussed often

India’s annual Union Budget is an important indicator of the government’s socio-political and economic priorities for the nation. The Union Budget 2018 focuses clearly on agriculture, healthcare, physical infrastructure and maintaining the fiscal credibility of India, which is key for global investors and rating agencies to assess India’s macro-economic soundness.

Since the last few years, public discourse on Indian agriculture has been gripped by pessimism. Farm and rural distress are terms that are discussed often. This is despite the fact that India is one of the leading producers in the world of several agricultural commodities such as rice, cotton, fruits and vegetables. The government’s mission is to double farmers’ incomes by 2022. Do the agriculture-related proposals in the Budget take us closer to that target? I would say the answer is an emphatic ‘YES’.

The Finance Minister recognized the fact that India’s agriculture policy has remained fairly production centric in the past. “Agriculture has to be an enterprise,” he said in his Budget speech. It is critical to make agriculture a throbbing enterprise that powers the Indian economy. While several policies outside of the Budget try to lead in that direction, it remains to be seen, how the decision to offer 1.5 times more Minimum Support Price (MSP) than the incurred cost, actually plays out in the farms and fields.

Does ‘cost’ here mean just the input cost for the crop or does it include the cost of farm rent, interest on land acquisition costs etc. Also how and when will it be rolled out? Beyond the big headline numbers, these details matter a lot. That is because a sudden spike in MSPs for select produce could determine crop patterns. It has a bearing on the crop diversification that the government wants to encourage. For instance, the 1.5 times increase for rice and wheat could discourage farmers away from vegetables. Also, what impact would higher MSPs have on inflation, which in turn has a bearing on interest rates?

Nearly 85 percent of Indian farmers are small and marginal landholders. And the Budget recognized two critical issues related to small farmers. One, they need to be able to produce a great deal more from the same land holding. Two, smallholders have to be linked better to markets for them to earn more.

To that end, the Rs. 2,000 Crore corpus to improve the agriculture markets’ infrastructure, better align the Pradhan Mantri Gram Sadak Yojana (India’s flagship rural road build scheme) with rural and regional agri-markets, and the Rs. 500 Crore allocation for Operation Green, a horticultural leap on the lines of India’s successful Dairy Revolution (Operation Flood), are very helpful measures. Replicating the success of Operation Flood, which ushered a boom in India’s milk production might be harder and more cost intensive for seasonal perishables like vegetables, since vegetables are harder to process and keep ‘shelf fresh’ than milk.  

The setting up of giant agriculture clusters with connected food processing zones would certainly create better food and agriculture ecosystems in India on the lines of say specialized automobiles and electronics zones. Further, Indian agriculture and Indian growers in particular, can immensely benefit from improved infrastructure in cold storage, logistics and transportation. But these developments can’t happen overnight and require the government’s backing coupled with public private collaboration. At the end of it, the success of these new policy interventions depends on quick implementation, detailed execution and sustained efforts, to make India the agricultural powerhouse it has the potential to be!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Peter Mueller

Peter Mueller is the Head of Crop Science, Bayer South Asia.

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