Union Budget: Doubling farmers’ income a mirage

Budget 2021-22 does not inspire confidence to even increase farmers’ income, so doubling it is far fetched

There appears to be no relation between the recent Budget allocations for agriculture and the goal of doubling farmers’ income. With budgetary allocation to agriculture down 8% from last year and in the absence of major flagship schemes, will the Budget help achieve this goal?
Agriculture is characterised by low labour productivity though it employs 45% of India’s workforce. Farmers are overly dependent on the South-West monsoon, as only 49 per cent of the gross cropped area is irrigated. Yet, agriculture plays a critical role in the socio-economic development of the country.

With huge uncertainties and risks, the growth in gross value added (GVA) of agriculture and allied sectors has been fluctuating over time. As per the Economic Survey, during 2020-21, the GVA for the entire economy is estimated to contract by 7.2 per cent but for agriculture it would grow. However, this is unlikely to translate into higher income for farmers.

Bright Spot

The share of agriculture in the gross domestic product (GDP) has crossed 20% for the first time in the last 17 years, making it the sole bright spot in the GDP performance during 2020-21, according to the Economic Survey. The resilience of the farming community in the face of adversities made agriculture the only sector to have clocked a positive growth of 3.4% at constant prices during this period when other sectors slid.

It is pertinent to recall Prime Minister Narendra Modi’s clarion call of February 28, 2016, that by the time India celebrated its 75th Independence Day in 2022, farmers’ income would have doubled. The Union Budget 2021-22 presented on February 1, 2021, was the penultimate Budget before the deadline but the plan to achieve this ambitious target has not been outlined in the document.

Missing Goal

The Union Budget Estimate (BE) for 2021-22 was Rs 1.23 lakh crore, compared with Rs 1.16 lakh crore in Revised Estimates (RE) 2020-21 and Rs 1.34 lakh crore in Budget Estimates (BE). This is a minuscule increase of 5% from last year’s RE but was 8% below the 2020-21 BE announced in February 2020. The total combined expenditures of the Ministry of Agriculture & Farmers’ Welfare and the Ministry of Fisheries, Animal Husbandry & Dairying formed only 5% of the total Central expenditure.

A close examination of the key allocations in the Budget as a percentage of the total expenditure of the two Ministries put together under different heads clearly shows a lack of interest to achieve the goal of doubling farmers’ income.

Crop and Livestock Productivity: Rs 13,408 crore has been allotted to improve yield and productivity in the sector against Rs 13,320 crore last year but almost over 25% was not utilised. The Pradhan Mantri Krishi Sinchayee Yojana has got Rs 11,759 crore as against Rs 11,378 crore last year.

The impact of this scheme is doubtful due to the under-utilisation of funds in 2020-21 and its ambiguous impact on increasing irrigation intensity. The corpus fund for Micro Irrigation Fund under Nabard has increased from Rs 5,000 crore to Rs 10,000 crore.
Support Activities: Interest subvention to short-term credit to farmers of Rs 19,468 crore is lesser by Rs 1,707 crore of last year BE. The Pradhan Mantri Fasal Bima Yojana got Rs 16,000 crore, which is not much increase from last year.

Market intervention Scheme and Price Support Scheme have got Rs 1,500 crore. It was underspent by less than 50% last year and allocation under this has been reduced from Rs 2,000 crore in 2020-21 (BE).

The Food Corporation of India (FCI) under the National Food Security Act procures cereals, mostly rice and wheat, as part of MSP to farmers. Allocation under this has increased by one-and-a-half times this year from Rs 77,983 crore in 2020-21 (BE). However, if the financial support of Rs 1,36,000 crore extended through loans from the National Small Savings Fund to FCI in 2020-21 (BE) is added (it was brought under the Budget in 2021-22), there is a decline in allocation between the two periods.

Allocation for 10,000 farmer producer organisations is Rs 700 crore, though last year it was Rs 500 crore (BE) and Rs 250 crore (RE).

Income Support

The allocation for PM-KISAN is Rs 65,000 crore, which provides Rs 6,000 in three equal instalments to registered farmers. The scheme is not reaching all farmer households and is not necessarily pro-poor. Consequently, the scheme is underachieving its target of 14 crore farmers.

Generally, there is only stagnation or much lower allocation than last year as only half of last year’s allocation was spent. A report by the standing committee on agriculture submitted to Parliament on March 3, 2020, said that the Union government has asked all departments to work towards doubling farmers’ income.

As part of the initiative, the Indian Council of Agricultural Research (ICAR), Delhi, has prepared plans for each State and sent them for implementation. But there is no provision of funds or coordination about schemes on how States should work or how the government will monitor and analyse the progress.

This kind of manoeuvring will possibly push the farm sector towards greater debt and fiscal distress, which in a pandemic year can only translate into a further distressed economy rather than provide a morale boost to revive it.

In sum, the Budget for 2021-22 does not inspire confidence in even increasing farmer incomes if not doubling. Is the government indicating that it was merely sloganeering, and the target is not achievable? In the background of the raging farmers’ agitation, this is likely to widen the government’s trust deficit with farmers.

(The author is Director, Centre for Good Governance, Hyderabad. Views are personal)

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