Decoding the Union Budget 2104: Agri Sector

Very few sectors are as important, yet as beleaguered as agriculture in India. Engaging more than 50% of the country’s workforce, it offers livelihoods to 75% of the population living below the poverty line. It consumes 80% of the nation’s fresh water resources, a quarter of the total electricity and more than 70% of central government subsidies. However, it accounts for just about 14 per cent of GDP.

Indian agriculture is heavily dependent on rainfall, with just about a third of the total arable area being irrigated. In recent times, temperatures as well as the variability in rainfall have been increasing, adversely impacting the farm production.

Consequently, the policy agenda must aim to contain food inflation, yet making farming profitable; make agricultural production and the farmers more resilient to weather variations; improve productivity of the subsidy spends, and minimise their market distortion impact.

Regrouping the proposals along the above lines will help decode the Budget.

Contain food inflation, yet making farming profitable:

Since this objective has an inherent conflict, the Government is using five different strategies to tackle the complexity, viz (1) funds have been allocated to set up two more research institutions of excellence, two additional agricultural and horticultural universities, and a Kisan TV, (2) substantial resources have been provided for upgrading the warehousing and agri-tech infrastructure, besides creating a corpus for ‘Long Term Rural Credit Fund’ to boost investments, (3) financial support has been extended to Bhoomi Heen Kisan through NABARD, and to set up a Producers Development and Upliftment Corpus (PRODUCE) to build the capacity of the producers organisations, (4) promised that the Central Government will work closely with the State Governments to reform the APMC Acts, and (5) proposed to establish a Price Stabilization Fund to mitigate the distress from price volatility.

Make agricultural production and the farmers more resilient to weather variations:

Besides giving impetus to watershed development through a new programme called Neeranchal, a new scheme called Pradhan Mantri Krishi Sinchayee Yojana has also been announced. If the Sinchayee Yojana is implemented as well as the earlier Pradhan Mantri Gram Sadak Yojana that made a significant difference to the rural road, we can hope for better days ahead in irrigating farms. Funds have also been allocated to establish a National Adaptation Fund to mitigate the challenges arising out of climate change. One would have liked to see some funds allocated to a reworked crop / weather insurance scheme too. That didn’t happen.

Improve productivity of the subsidy spends, and minimise their market distortion impact:

Quite rightly, it has been announced that MNREGA will now be substantially linked to agriculture and allied activities. Shortage of labour during the peak agricultural operations was a major problem of the farmers so far. It is also good to see the Government’s commitment to restructure FCI, and improve the efficiency of food grain management in the country. Perhaps the most important announcement related to agriculture in the Budget is the scheme to provide to every farmer a soil health card in a Mission mode. This will go a long way in scientifically rationalising the fertiliser usage and reducing the subsidies.

In sum, all of these steps will put more money into the hands of the farmers!

 

First published in the Rural Marketing Association of India's Special Budget Edition at http://www.rmai.in/pdf/rmai%2021-07-2014.pdf