The agriculture sector and farmers are facing a difficult period. The average annual growth rate of value added in agriculture has dropped to 1.8% during the first four years of the 12th Plan, and prices of most of crops received by farmers have remained depressed despite poor harvest during 2014-15 and 2015-16.
The country is facing adverse weather, including deficient rainfall, for the fourth season in a row. This has led to a sharp slowdown in farm incomes, and also caused concerns about food security and the sector’s future.
The sector needs reforms, new policy initiatives, increased private sector participation, higher investments, competitive markets, new forms of institutions and mechanisms, and science-based modernisation. This is a tall order for a single budget, but it can set the direction for change.
Watch video: The Big Picture Of Arun Jaitley’s Budget 2016
The Finance Minister’s budget speech indicates the Centre’s seriousness to fix problems facing the farm sector and put it on a trajectory of sustainable, stable growth. Major initiatives focus on irrigation, risk cover and compensation for crop losses, remunerative prices for farmers, enhanced supply of institutional credit, increase in market competitiveness, convergence of MGNREGA with PMKSY, promotion of organic farming, raising production of pulses, creation of rural infrastructure and linking agriculture to non-agriculture through Rurban growth clusters.
The budget has accorded highest priority to agriculture infrastructure. It proposes to give a thrust to public investments to expand irrigation, harness traditional water resources, develop rural roads and electrification, create warehouses and develop and upgrade agri markets.
The government has also announced that the Pradhan Mantri Fasal Bima Yojana will be implemented from kharif 2016-17. The new scheme involves lesser premium by farmers, expansion in coverage of loss, higher claims and increased penetration.
Agriculture markets in India are fragmented and suffer from poor competitiveness, low efficiency and low scale. A unified agricultural marketing e-platform requires states to undertake major market reforms. This will modernise market operations and bring competitive prices to farmers. Benefits to farmers are already evident from markets in Karnataka operating under the e-platform.
In tune with concerns raised in the Economic Survey, the budget recognises the need to break stagnation in production of pulses and announces incentives in the form of price guarantee for pulses such as paddy and wheat.
That the solution to many agricultural problems lies outside agriculture has been ignored till now. There is a need to take agri-business investments as well as agro-based industry and services to rural areas to provide employment to farm workers outside of agriculture. This is the only way to double income of farm workers.
The budget has included major initiatives to transform agriculture and raise farm income, but it seems to have missed some small but key aspects such as agricultural R&D and technology, extension system, seeds sector, farm mechanisation and land lease reforms.
The biggest challenge to implementing budgetary proposals and getting desired results is active participation from states. Agricultural marketing, digitisation of land records, implementation of crop insurance and development of irrigation comes under the purview of states, while public investments, resource allocation, credit, investments, trade policy and MSP are decided by the Centre. Unless the Centre and states work together in the true spirit of cooperative federalism to achieve agricultural transformation, the goal will remain half met.