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No Gamechangers For Farmers

Budget makes the right moves on agriculture, but they may not be bold enough.

Written by Ashok Gulati | Published:March 1, 2016 12:01 am

haryana farmer, indian farmer, wheat, haryana wheat, chandigarh newsIn the last two weeks, Prime Minister Narendra Modi addressed three rallies of farmers, one each in MP, Karnataka and UP. Although it was late in the game, as farmers have been reeling under acute distress for two years, yet better late than never. Addressing the rallies, the PM thundered he would like to see farmers’ income double by 2022. It was a prologue to the budget. With agri-growth having collapsed to less than half a per cent per annum (average) in the last two years, the political writing on the wall was loud and clear. In his “Mann ki baat” on Sunday, the PM said this budget is his exam and he was confident of doing well.

How far has the budget addressed rural distress? Can it put agri-growth back on track, say, at 4 per cent per annum sustainably?

Some of the highlights: First, the allocation for the Department of Agriculture, Cooperation and Farmers’ Welfare (DoA), is raised from the revised estimate (RE) of Rs 15,809 crore in FY16 to a budgeted estimate (BE) of Rs 35,983 crore for FY17, a whopping increase of 127 per cent! This would make anyone jump and conclude what a wonderful stroke the finance minister has played for farmers. But hold on. There’s a catch. Much of the increase (Rs 15,000 crore) is due to interest subsidy on short-term credit. Earlier, this subsidy was Rs 13,000 crore and was shown under the Department of Financial Services. Now, it’s transferred to the DoA. So, more a sleight of hand than real increase in allocation. Also, it’s important to note that already this interest subvention scheme is being criticised for its misuse by large farmers who borrow large amounts of credit at subsidised rates and put it in fixed deposits or lend it to those who don’t have access to institutional credit at higher rates. So this isn’t going to redress rural distress much, and can’t turn around agriculture growth.

Second, the Pradhan Mantri Fasal Bima Yojana, which the PM had been calling a game-changer, gets Rs 5,500 crore. If implemented quickly, and with high technology, to assess crop damages and directly put the compensation in farmers’ accounts, this can give some relief to farmers. However, the infrastructure to do this isn’t yet in place. Thus, we have to keep our fingers crossed for at least another two years before it starts showing some positive gains.

Third, on irrigation, surely there’s some focus through the Pradhan Mantri Krishi Sinchai Yojana. However, the budgeted amount under its four components (Rs 7,392 crore) isn’t very different from the RE of FY16 (Rs 7,589 crore). But focus on irrigation also calls for completing quickly some ongoing schemes (23 out of 89). Besides, there’s a provision to create a long-term dedicated fund under the Nabard for Rs 20,000 crore for irrigation and another proposed one of Rs 6,000 crore for groundwater. The augmentation of irrigation facilities and proper water management holds the key for turning around Indian agriculture. But the allocations are still not enough to make a dent in the next two-three years. There’s also an indication to use MGNREGA funds for five lakh farm ponds. The gains may be coming by 2019, if one is lucky.

Fourth, allocation under Pradhan Mantri Gram Sadak Yojana has gone up from Rs 15,187 crore (RE, FY16) to Rs 19,000 crore (BE, FY17), an increase of 25 per cent. This is a good move that will provide connectivity to hinterlands and can contribute to growth with jobs.

There are many other smaller but positive steps from organic farming to 100 per cent FDI in food processing to the e-national market. But all of these will take time for concrete results. They aren’t game-changers.

Where the budget has disappointed is the lack of any bold move to rationalise the biggest resource guzzlers — food and fertiliser subsidies (more than Rs 2,00,000 crore, plus more than Rs 1,00,000 crore of pending bills). That’s where the biggest scope for savings was. The budget stopped at just doing some pilots in fertiliser subsidy for DBT — not enough to make much difference to the farm sector. Overall, the budget makes the right moves as far as farming is concerned, but these moves aren’t as bold as one would have imagined to get the farming community out of distress. Farmers will have to keep praying and relying on rain for many more years.

The writer is Infosys Chair Professor for Agriculture at Icrier, Delhi