In the run-up to 2018-19 Budget, the main theme of discussions by economists, officials and political leaders alike seems to be on one critical area of the economy, and that is agriculture and the need to improve rural incomes.
The focus on agricultural and rural growth has been given an impetus by recent state elections where farmers’ distress had caused voter swings away from entrenched political parties. For instance, the BJP found less support in rural areas where farmers facing a crisis looked towards other parties like the Congress. In addition, the past year has seen a series of farmers’ protests being organised in many parts of the country, in response to low food prices that have led to continuing farmers’ suicides.
It has to be recognised that agriculture which accounts for 17 per cent of GDP also employs nearly 50 per cent of its workforce. This is an area where unremunerative prices and high inputs costs coupled with lack of comprehensive crop insurance has not only led to farmers’ suicide but also massive urban migration. No wonder then that recent discussions by Prime Minister Narendra Modi with over 40 economists has put the spotlight on rural areas and the need to revitalize the agricultural sector.
One of the suggestions is that instead of trying to improve productivity levels of farm products, efforts should be made to raise rural incomes which have not risen as much as expected. Finance Minister Arun Jaitley, in the budget to be presented on February 1, is expected to take several of these suggestions on board while formulating the forthcoming budget.
It is thus expected that there will be a significant rise in outlay for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) which ensures that employment is available throughout the year in rural areas. Secondly there may be a rise in spending under the Pradhan Mantri Gram Sadak Yojana to accelerate road construction. Rural electrification programmes and the Ujjwala LPG Scheme are also bound to be expanded to give better infrastructure facilities to farmers.
Agricultural credit was increased to Rs 10-lakh-crore in the current fiscal but it is bound to stepped up substantially next year. What is of greater importance is the need to ensure that farmers do not face extreme distress due to crop failure and inability to repay loans. Flexibility in loans repayments needs to be institutionalised in the banking system.
In addition, crop insurance will have to become more comprehensive and easily available. The Fasal Bima Yojana which was to cover 40 per cent of cropped area this year is to be raised to 50 per cent in 2018-19 but the coverage may now have to be expanded even more rapidly.
With many food processing units in the pipeline, Mr Jaitley is expected to give incentives to promote allied activities in farming such as dairy or shrimp and fish farming as well as horticulture production. This will reduce dependence on traditional crops. The agriculture ministry is already giving greater emphasis to post harvest value addition.The Rashtriya Krishi Vikas Yojana allocates 40 per cent of its funds for creating such infrastructure.
Irrigation especially micro-irrigation is also expected to be given a bigger focus as this is one of the key agricultural inputs. Outlays are thus expected to be enhanced in this area as well as for agricultural sector as a whole. The outlay for agriculture in 2016-17 was Rs 1,87,223-crore. The NDA Government has already declared its aim to double farmers incomes by 2022. This is a tall order but it is essential to push the economy onto a high growth path.
In the current fiscal overall growth is expected to be at a four year low of 6.5 per cent. Agricultural growth has also been uneven for the past few years ranging from 1.5 to 4.9 per cent. This is not enough to raise rural incomes. To boost rural growth, the NDA Government is expected to take the opportunity provided by the budget to provide enough support and incentives to the agricultural sector to end farmers’ distress and finally bring stability to this crucial sector of the economy.