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Unpacking The Budget For The Agricultural Sector ?

Keeping the long-term lens in designing the budget frameworks may prove to be more beneficial in realizing policy objectives

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The recently announced Indian budget seeks to focus on accelerating growth in an inclusive manner, benefitting all sections of the society. It sets an overarching framework of advancing India’s progress on all fronts over the next 25 years, coined as “Amrit Kaal” of the next 25 years – from India at 75 to India at 100. For agriculture, there has been a 4.5 % annual increase over 2021-22 (revised estimates) [figure1] and restructuring of the budget heads through consolidation of schemes [table 1].

Agriculture has been a key priority area for policy in India with the action plan to double farmer’s income by 2022. Despite the challenges during the pandemic, agriculture has been a resilient sector accounting for a sizeable 18.8 per cent (2021- 22) in Gross Value Added (GVA) of the country registering a growth of 3.9 per cent in 2021-22[1]. To realize the policy objectives, the Union Government has been significantly increasing the expenditure towards agriculture and allied sectors from Rs. 46361 crore in 2017-18 to Rs. 135854 crore in 2021-22 [Figure1]. 

Source: Expenditure Budget, Union Budgets (2014-22)

Key takeaways for agriculture sector from the budget 2022-23
a.    Crop diversification 

The budget emphasized a renewed focus on enhancing Oil seeds productivity and total production to reduce dependence on imports (INR 600 crore). Further, in the International Year of Millets 2022-23, The budget provided for post-harvest value addition, enhancing domestic consumption, and for branding millet products nationally and internationally.

b.    Supply side constraints: Technology development and service delivery 
The cornerstone of the budget is the focus on growth through significant Capex expansion & spending, with 35.4% hike in GOIs budget outlay to drive supply side efficiencies and significant spending on infrastructure development; which in-turn may have spillover effects on agriculture. While a number of measures have already been employed to strengthen supply side constraints , impetus to start-ups with the aim of to "finance startups for agriculture and rural enterprise, relevant for farm produce value chain." The activities for these startups will include, inter alia, machinery for farmers on a rental basis at farm level, and technology including IT-based support for FPOs (farmer producer organisations).This may help bridge this gap by allowing technology and innovation. Delivery of digital and high-tech services to farmers in a PPP model may prove to be effective in delivering the necessary technical know-how to the farmers. The use of Kisan Drones for crop assessment, , digitisation of land records, spraying of insecticides, and nutrients.

c.    Natural Farming, Modern day agriculture value addition 
The budget also focused on natural farming devoid of any chemical use. The Finance-Minister said, "Chemical-free natural farming will be promoted throughout the country, with a focus on farmers' lands in 5-km wide corridors along river Ganga, at the first stage." Further the states will be encouraged to revise syllabi of agricultural universities so as to meet the needs of natural, zero-budget and organic farming, modern-day agriculture, value addition and management.

(From left) Vidya Vemireddy and Ram MudholkarProbable impacts and implications
The supply side constraints severely limit the agricultural growth to take off in India. This budget addresses some of them through boosting provisions for technology enhancement, entrepreneurship and infrastructure but the lack of detail in capex spending for agriculture limits the analysis of the extent of spillover effects. The push for innovation is welcome move given the burgeoning start -up sector and would aid in realizing the potential in the sector. The focus on allied sectors which are the major drivers is also needed. Technology adoption and capacity building remains a key challenge among farmers in India. Several studies point out the potential and the need to improve the extension services for improving technology adoption, raising agricultural productivity and reducing yield gaps. For high-tech sector, the PPP model may prove effective, however, less impetus for the large extension network in India may prove to be a missed opportunity. The budgetary allocation for extension is marginally increased by 8% to INR 1000 crore [table 1] which is insufficient for the envisaged capacity building target at farm level. Further improvement in these directions may prove to be very effective.

The budget envisages inclusive growth but most of the thrust areas are more focused on medium-large farmers. While the exports have been rising in recent past, the bane of agriculture has been the lack of global scale marketing. The budget should have highlighted this aspect and should have highlighted steps to continue strengthening of FPOs as one key way to address the marketing challenges. Inclusive growth in the next 25Y needs to recognize the increasing  needs of women in agriculture; who form a significant chunk of the agricultural worker base.

Research in agriculture is key for technological advancement. However, the budgetary allocation has remained the same as 2020-2021 levels at INR 8513 crore. As a part of such a vision, agriculture research needs a complete overhaul and needs significant research investments both public and private. The budget should have highlighted this aspect and provided for a directional support as a priority. Besides research investments, it's prudent to strike a right balance between long term central schemes, centrally sponsored schemes and short-term cash-based schemes such as PM-Kisan. GoI has restructured the schemes aiming at the comprehensive budgeting, however, keeping the long-term lens in designing the budget frameworks may prove to be more beneficial in realizing policy objectives. At the juncture of the next 25YR - 'Amrit Kaal' a clear outcome-oriented vision is needed for the agricultural sector with a focus on research and agricultural education, expanding global market presence through exports, and infrastructural support system.

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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agriculture Union Budget 2022-23

Vidya Vemireddy

The author is Assistant Professor at Centre for Management in Agriculture, IIMA

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Ram Mudholkar

The author is Strategy Consultant – Production Agriculture Industry

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