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Union Budget 2019: Will Agriculture Get Industry Status?

Look forward to industry status for agriculture in this Budget! BW Businessworld predicts that the Union Budget will carry forward the momentum set in the first term of the Narendra Modi led government to Modi 2.0, with special emphasis on two new ministries. It is also likely to fulfil the pre-election promise of a massive Rs 25 lakh crore investment in the rural and agriculture sectors

Photo Credit : Shutterstock


Nirmala Sitharaman, now Union Minister for Finance, had during her tenure as Union Commerce Minister in the first term of the Narendra Modi - led National Democratic Alliance (NDA) government, hinted at industry status for agriculture. At the 4th SBI Banking & Economics Conclave she had said, "I think agriculture should be given industry status, if so many people are dependent on agriculture." So, let us assume that she will be inclined to stick to her stance. 

Agriculture cannot help but be a priority for Modi 2.0 (as the second term of the NDA government is often dubbed) for two states hugely dependent on agriculture – namely Maharashtra and Haryana – go to polls this year. Agriculture, therefore, cannot but be a focal point of the Union Budget, scheduled to be announced on July 5.It may be borne in mind that the challenges of the agriculture sector impact not just India’s overall development, but the welfare of its rural poor too.

The famous “mission mode” of Modi 1.0 went through many a roller coaster ride in the agriculture sector. A few final policy strokes in the end did pave the way for Modi 2.0, however. Economists like Ajit Ranade and farmer representatives like Anil Ghanwat, are of the opinion that no government has ever paid agriculture the attention it deserves. Policy experts now believe that agrarian distress could be mitigated with the Rs 25 lakh crore investment in the rural and agriculture sectors promised in the election manifesto of the Bharatiya Janata Party (BJP), which leads the NDA coalition. 

In the coming Budget, allocation of funds for key sectors is likely to retain the priority apportioned to them in the previous Budgets of the NDA. The Budget proposal that Finance Minister Nirmala Sitharaman will place in Parliament will aim to raise agricultural productivity per unit of land, notwithstanding the limitations of scarce water resources. Reduction of rural poverty through an inclusive strategy, is also expected to be a key aspect of her Budget. Agricultural growth after all, is key to food security of the nation and essential, should India strive to emerge as an ‘export powerhouse’. 

In the last three marketing years foodgrain production has been at record levels. The second advance estimates of the 2018-19 (both Kharif and Rabi seasons) was 281.37 million tonne against the set target of 290.25 million tonne. The NDA government credits the policies it has adopted for the farm sector for the better production. Procurement of foodgrain for the public distribution system though, will prove a challenge as the Food Corporation of India (FCI) has an outstanding debt of about Rs 1.81 lakh crore from the National Small Savings Fund. The government has so far provided some Rs 80, 000 crore to the FCI. 

The last Budget had provided an interest subsidy of Rs 15,000 crore for short-term credit for agriculture, which is worth evaluating. The Union finance ministry is also likely to evaluate the agriculture credit disbursement of Rs 6.5 lakh crore till March 2018 against the target of Rs 11 lakh crore for the 2018-19 financial year. It may be recalled that the BJP election manifesto (Sankalp Patra) had promised continuum of the momentum set for the agriculture sector in its previous budgets.

Siraj Hussain former Secretary, Agriculture, predicts a fulfilment of promises made by the BJP. “One of the most watched promises would be a commitment to invest Rs 100 lakh crore in infrastructure, of which Rs 25 lakh crore was promised for the agri-rural sector,” says Hussain. “During the Modi 1 period from 2014 to 2019, the total Budgetary allocation for infrastructure had been Rs 19.36 lakh crore, of which Rs 10.91 lakh crorehad been allocated only in the last two years. If Rs 5 lakh crore a year are prudently invested in agriculture and rural infrastructure, India would largely overcome distress in the farm sector and farmers’ suicides may become history,” believes Hussain. 

Marketing farm produce

Another major announcement in this Budget may be extension of the Agriculture Produce Marketing Committees (APMCs) to e-NAMs from 585 now to more conclusive numbers. The ‘Gramin Agricultural Market’ (GrAMs) that were being developed in some 9,477 villages surveyed, may be extended too. Agribusiness investment and regulatory expert, Vijay Sardana, says, “Major investment in agriculture marketing infrastructure, supported by marketing reforms are seriously needed and expected from the government in this Budget. Meanwhile, there must be focus on the two new ministries that handle water and animal husbandry. They must get the desired funds and support.”

Critically evaluating both irrigation and the PM-KISAN scheme, Hussain says, “Under PM-Kisan, the Interim Budget allocated Rs 75,000 crore for granting Rs 6,000 per year to farmers holding up to two hectares of land. The manifesto promises to expand the coverage to all farmers, irrespective of their landholding. At the most, coverage of farmers holding more than two hectares of land may be considered in rainfed areas, as the government has failed to provide irrigation to them.” 

“On a critical note, the Pradhan Mantri Krishi Sinchai Yojana in Modi 1.0 did provide a fillip to completion of 99 long-pending projects, but the implementation did not achieve the desired pace,” points out Hussain. “The Central Water Commission has not released data on the Irrigation Potential Utilised after 2011-12, so it is not known if the 31 irrigation projects that were ostensibly completed, have actually resulted in utilisation of a higher irrigation potential,” he says. Hussain’s words are worth taking note of, as the ‘Per drop More crop’ slogan had been backed up with fund allocation of Rs 4,000 crore. Extension of the PM-KISAN scheme to farmers with landholdings of five acres will entail funds allocation of some Rs 87, 000 crore, or Rs 12, 000 crore more than had been allocated earlier.  

Free and Fair Trade

Anil Ghanwat, President, Shetkari Sangathna (Joshi group) seeks less intervention of the government in trade in agricultural produce, the freedom to use technological innovations and foreign investment in agribusiness. Industry also has it expectations. Raunak Verma, Country Manager of CNH Industrial India (mother group of New Holland Agriculture) says, “In agriculture, which is a key industry for us as we locally manufacture New Holland tractors and Case IH harvesters, there are major topics which need to be addressed. Stubble burning is one of them and must be put on the agenda at the national and local levels, as it is a serious concern for the future health of the soil and crops. Great attention must be given to land reform which is essential to boost agricultural efficiency further, as well as infrastructure.” 

Water conservation is also top priority for industry veterans. R.G. Agarwal, Chairman of Dhanuka Agritech, believes that access to urban markets is another critical issue. “The government should announce measures to help farmers transport fresh produce (vegetables and fruits) through four-wheelers to sell their produce directly to consumers in the cities, bypassing the middlemen involved. Developing infrastructure for agriculture at the village-level should be a priority for inclusive development,” he says. 

“As per the Dr Ashok Dalwai Committee appointed by the Prime Minister on Doubling Farmers’ Income, the cost of pesticides usage in the entire agriculture process is a mere 0.4 per cent,” Agarwal points out, “but it should be noted that if pesticides are not of good quality then the remaining 99.6 per cent investment in agriculture may go waste. As such, special focus should be to ensure supply of quality pesticides to farmers.”

Voicing a frequent industry demand, Agarwal adds, “Finally, GST on pesticides should be reduced from 18 per cent to five per cent in line with fertilisers and other agri-products so that farmers get quality pesticides at a reasonable price to protect their crops from pests and diseases.”Industry has no doubt, conveyed its demands to the mandarins of North Block. We now need to wait and see what the new Finance Minister thought of them.

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Union budget 2019-20 agriculture