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BW Businessworld

Budget Challenge: No Bed Of Roses

The new regime will inherit tall targets like doubling farmers’ income, along with policies that have not worked – and a drought

Photo Credit : Shutterstock


When cultivation begins other arts follow, the farmers, therefore are the founders of human civilisation  
 – Daniel Webster, former United States Secretary of  State

In his last budget speech Union  Minister for Finance, Arun Jaitley  had said, “My government is committed for  the welfare of  farmers. For decades, (the) country’s agriculture policy and programme had remained production centric. We have sought to effect a paradigm shift.” Indeed, the Bharatiya Janata Party (BJP) led coalition at the Centre has over the last four years announced a plethora of policy measures that aim to double income levels of  Indian farmers and energise the rural economy. As  the term of  the present government draws to a close, statistics though, throw up scary paradoxes.

Presenting a paper at the Indian Agriculture Outlook Forum - 2018, Pramod Kumar of the Institute of Social & Economic Change for instance, claimed that the rural economy’s contribution to India’s total gross domestic product (GDP) was actually expected to slide from 47 per cent in 2011-12 to 44 per cent in 2020-21. The following year incidentally, is the targeted deadline for doubling farmers’ incomes. The rural economy’s share of the GDP is projected to plummet further to 40 per cent by 2032-33. These projections belie the professed paradigm shift in the policy on agriculture.

In a paper titled, Demand and supply forecasts of foodgrains, oilseeds, horticulture and animal products, Pramod Kumar also predicts a steady rise in the rural population from 835.4 million in 2011-12 to 900 million by 2021-22. By 2025-26, when India’s total population is likely to shoot up to 1.447 billion, 918 million people will probably live in the rural hinterland. A rising rural population will only accelerate the pace at which landholdings get fragmented.

“As the per capita availability of land is getting reduced progressively, horizontal growth in agriculture has very limited scope in future,” says O. P. Chaudhary, Joint Secretary in the Department of Animal Husbandry, Dairying & Fisheries in the Union Ministry of Agriculture.  He is obviously referring to the inevitable drop in income on the farms as landholdings get smaller. Crop production, he points out, requires more space than animal husbandry and was prone to a “high degree of uncertainty in income”. Incidentally, the only major announcements for occupations allied to agriculture by this government have been for country cow breeds and fisheries (Operation Blue).  The poser then is, will the income disparity between urban India and rural Bharat persist into the near future, or will the battery of measures announced by the Narendra Modi-led government be able to bring about that “paradigm shift”? The general elections ahead this year will usher in a new regime that will inherit the goals and targets and the policy path chalked out by the present government. Will the life and earnings of the farming folk see the new dawn promised to them then? BW Businessworld attempts to sift the chaff from the grain in the estimates on the progress on agriculture.

The paradigm shift
In December 2018, the Union government approved an Agriculture Export Policy to ensure a stable trade policy regime. The policy aims to increase India’s agricultural exports to $60 billion by 2022 and $100 billion subsequently. Earlier in September 2018, the Union government had announced a Rs 15,053 crore ($2.25 billion) procurement policy entitled the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA). The programme allows state governments to choose a compensation scheme to ensure fair prices for farmers.

Also in September 2018, the Cabinet Committee on Economic Affairs (CCEA) approved a lifeline for sugar industries in the way of a Rs 5,500 crore ($820.41 million) assistance package. The Union government will provide Rs 2,000 crore ($306.29 million) for computerisation of Primary Agricultural Credit Societies (PACS) to ensure that cooperatives benefit from digital technology.

To encourage innovation and entrepreneurship in agriculture, the Union government is introducing a new AGRI-UDAAN programme to mentor startups and enable them to connect with potential investors. The Pradhan Mantri Krishi Sinchai Yojana (PMKSY), launched with a corpus of Rs 50,000 crore ($7.7 billion) aims to develop irrigation sources to provide a permanent solution to drought.

To triple the capacity of the food processing sector in India from 10 per cent of agricultural produce at present, the Union government proposes to invest Rs 6,000 crore ($936.38 billion)  in mega food parks as part of the Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA) scheme. It has allowed 100 per cent FDI for marketing food products and food product e-commerce through the automatic route.

Uphill task

At the end of the day, apart from other goals, the plethora of policy announcements target increasing the average income of a farm household to Rs 2,19,724 (or Rs 2.19 lakh) at current prices by 2022-23 from Rs 1.20 lakh in 2015-16. Doubling the average income of a farm household will prove a really tall task in a country in which marginal farmers are the majority.
Meanwhile, drought conditions have been declared in many parts of  Karnataka and Maharashtra. Siraj Hussain, a former Secretary in the Ministry of Agriculture, is convinced that the new regime that comes to power after the elections will find itself grappling with two major problems – dwindling prices of farm produce and the threat of a drought. “Low farm prices and a possible drought may be two major challenges for the government to come in 2019,” he emphasises.  

Market prices of farm produce have frequently dipped below the minimum support price (MSP) assured by the Union government, triggering unrests on the farmlands. The farmer does not get the safeguard the MSP promises when local market or Mandi prices dip below the support prices assured by the government (please see chart above).

Hussain recommends unlimited cash transactions at the Mandis. He also supports a floor of Rs 40 lakh for registration for GST for businesses dealing with food products. Incidentally, early in January, the GST Council announced some reliefs for small businesses that included kirana or grocery stores, by doubling the exemption limit for paying GST to Rs 40 lakh.

“States have to implement policies and that is the biggest challenge in India,” says Prabhakar Kelkar, vice president of the Bhartiya Kisan Sangh. He points out that “government agencies simply can’t procure everything”. Shyam Ashtekar from the Shetkari Sangathana (Joshi) supports the viewpoint, adding, “Middlemen are the root cause of non-remunerative prices for farmers and this is the foremost challenge for any government”.  

Agribusiness income and regulatory expert Vijay Sardana does not quite think so. “If there is political will, make it a rule to ensure that 50 per cent of the shops be for farmers or allow farmers to sell directly without middlemen and create farmers’ markets in clusters of every 10, 000 of the population,” suggests Sardana.    

The road ahead
Ashok Dalwai, CEO of the National Rainfed Area Authority (NRAA) valiantly defends the strategies adopted for agriculture. “The government’s initiatives have brought in momentum and the pace of change has been showing acceleration,” he says. He dismisses projections that show a drop in farm income levels in the years ahead. “The government is committed to consistent and sustained growth of the agriculture sector and of the welfare of  the farmers,” says Dalwai emphatically, adding, “With this aim, the government is working on doubling farmer’s income (DFI) by 2022”.

Dalwai corroborates that the Inter-ministerial Committee set up to recommend a strategy for doubling incomes of farmers had already submitted its report to the Union government. He says the process of implementing the report had begun. “The (agriculture) ministry is confident of achieving its goal of doubling farmers’ incomes by 2022,” Dalwai  says confidently. He says, “The outcome of the policies and programmes will begin to acquire greater pace and visibility over the next few years.”

Siraj Hussain, who is convinced that drought will prove to be a major challenge for whoever wears the crown over the coming five years, even as he concedes that India is now better prepared to grapple with natural calamities like floods and droughts than before.  He suggests that the Essential Commodities Act be kept in abeyance for at least three years.

Incidentally, while presenting the Union Budget for the 2017-18 fiscal, Jaitley had mentioned a focus on irrigation schemes. He had said then that 96 districts had been identified where less than 30 per cent of the landholdings had irrigation facilities.  These districts were earmarked for the Prime Minister’s Krishi Sinchai Yojna - Har Khet ko Pani. “I have allocated Rs 2,600 crore for this purpose,” the Union Finance Minister had announced. Farm ministry statistics  though, show that compared to the financial target of Rs 1,802.99 crore for 2018-19, a relatively low amount of Rs 1,037.38 crore has been spent for this mega project.  

The drought declared in many districts of Maharashtra and Karnataka so far, may also jeopardise the targets for exporting agricultural products. Farm produce exports have risen but slowly, in the last two years from $33.9 billion in 2017 to $38.2 billion in 2018. The India Brand Equity Foundation (IBEF) predicts that farm exports may fall in 2019 to touch a seven- year low of $21.6 billion.

The new government at the helm  of India will therefore, inherit its tall aspirations of doubling the farmer’s income, along with strategies like the MSP that have not always proved effective and perhaps, drought conditions too. Keeping the hopes of farmers alive, therefore, is likely to prove an uphill task for the new government.

Ironically, farmers do not think so. “Yes, we are going for an interim Budget in 2019, but you may expect some big bangs (in the way of policy announcements) in the coming weeks,” exults Virendra Singh ‘Mast’, president of the BJP Kisan Morcha.

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Union budget 2019 economy agriculture