Thursday, May 26, 2022

Budget 2022: What Should Be The Key Focus Of Budget 2022-23 For Agriculture?

A comparison of income data taken from two rounds of the National Sample Survey (NSS) i.e. 70th (2012-13) and 77th (2018-19) suggests that nominal income of farmer households from all the sources has increased by around 29.7 per cent.

Budget 2022: What Should Be The Key Focus Of Budget 2022-23 For Agriculture?
In 2016 the Union Government adopted a strategy to double the farmers' income by 2022. Outlook India

Agriculture has remained at the centre stage of policy and academic discussions in the country due to a variety of reasons in recent decades. Amongst others, the farm crisis has still remained an uncontested issue despite having a plethora of political and economic promises time and again. In a move to address one of the most burning issues i.e. doubling farmers’ income, a number of policy and budgetary announcements have been made during the last five years. As a part of policy actions, in 2016 the Union Government adopted a strategy to double the farmers' income by 2022. As a result, the quantum of budgetary allocations towards agriculture and its allied sectors witnessed a rising trend since then which was considered a welcome step. Total expenditure by the Union Government towards the agriculture sector has increased from Rs. 46361 crore in 2017-18 to Rs. 135854 crore in 2021-22 (BE). However, approximately a three-fold rise in the budgetary allocations does not seem to have a visible positive impact on the condition of farmers. Even if we take agricultural income as the narrower definition of the overall wellbeing of farmers, there does not seem much improvement in recent years.  

A comparison of income data taken from two rounds of the National Sample Survey (NSS) i.e. 70th (2012-13) and 77th (2018-19) suggests that nominal income of farmer households from all the sources (which include income from wages, income from leasing-out the land, income from crop production, income from farming of animals and income from farm business) has increased by around 29.7 per cent (average monthly income from Rs. 6426 in 2012-13 to Rs. 8337 in 2018-19). It grew at 4.3 per cent annually as against 10 per cent recommended by Dalwai Committee as a plank to double the farmers’ income by 2022. We have also computed the real income after adjusting to the extent of inflation with the nominal income using Consumer Price Index (CPI-combined). The average monthly real income of the all categories of farmer households at all-India level has actually declined from Rs. 6045.2 in 2012-13 to Rs. 5925.4 in 2018-19 (a decline of around -2 per cent). There is paucity of income data after 2018-19 but the situation posed by COVID-19 must have affected income prospects further for the sector as it has done for the entire economy. The last few years have witnessed unimaginable loss of livelihood and income all over India. This might have worsened the agricultural income both nominal and real terms. It is thus important to question the approach of policy and budgetary directions rather than the efficiency of public expenditure in increasing farmers’ income.

Given the scenario, the upcoming budgets need to prioritise the following aspects while announcing budgetary provisions for agriculture.

Priority to Centrally Sponsored Schemes

There has been a negligible change in the Union Government’s expenditure on Centrally Sponsored Schemes in the budget expenditure earmarked for the Department of Agriculture, Cooperation and Family Welfare (DAC&FW) since the strategy towards doubling farmers’ income has been adopted. Allocations towards these schemes have increased from Rs. 11978 crore in 2016-17 to Rs. 17408 crore in 2021-22 (BE). On the contrary, the allocations to Central Sector Schemes increased substantially from Rs. 24594 crore to Rs. 104118 crore during the same period. As Centrally Sponsored Schemes are designed on the principle of funds sharing between Union and the State Governments, they encourage the latter to invest in the sector more. However, lower budgetary priority towards such schemes by the Union Government would also replicate the same at the State-level. As a result, the budgetary expenditure in some of the crucial schemes such as Rashtriya Krishi Vikas Yojana (RKVY), National Food Security Mission (NFSM), National Mission on Horticulture (NMH) etc. has not picked up the pace what should have been expected.

Priority to Core-interventions

The share of budgetary allocations in recent years is heavily skewed towards cash-based schemes. As a result, the increase in expenditure in the agriculture sector during the last four-five years has been on account of schemes viz. Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) and Pradhan Mantri Fasal Bima Yojana (PMFBY) focus on providing direct monetary benefits to farmers. The share of cash-based schemes to the total budgetary allocation for various schemes under DAC&FW and Ministry of Fisheries, Animal Husbandry and Dairying was as high as 79 per cent in last year’s budget. Therefore, only 21 per cent budgetary expenditure has been allocated towards “core” schemes, mandated to strengthen community-led infrastructure and handholding support to the farmers. Further, cash-based schemes are time-bound and exclusive in nature (excluding landless, women farmers and tenants etc.). Such schematic allocations to address the issue of doubling farmers’ income seem only addressing the symptoms of agrarian crisis in the short-term and not the root cause. So, it is high time to rethink the budgetary framework towards building the infrastructure which can support agriculture and allied sectors to bring in long-term viability and thus, sustainability.

More Focus on Allied Sectors

Given that the crop sector is highly vulnerable to weather conditions, the Dalwai committee has also mentioned the promotion of allied sectors for rural households. It has been found from NSS data that the income of marginal farmers from farming of livestock has declined to around -43 per cent in 2018-19 as compared to 2012-13. Except for the large category of farmers’ households, it has declined for all the categories of farmers even in nominal terms during 2012-13 to 2018-19. Although, the Union Government had created a separate ministry for animal husbandry, dairying and fisheries in 2019 to give a boost to allied sectors. But the pattern of budgetary allocations towards the allied sectors has not altered much. The share of budgetary allocations towards fisheries, animal husbandry and dairying has remained around 3 per cent of the total expenditure towards agriculture and allied sectors.  

Need for Comprehensive Budgeting

It has been well argued that the crisis in agriculture is deep-rooted and is a result of an accumulation of distress over the years. The current budgetary approach is only addressing the consequences of the agrarian crisis and is targeted towards short-term relief. Therefore, the policy direction should have been towards addressing the root cause rather than focusing on short-term measures. Moreover, investments are being made in interventions that are designed to reach farmers individually rather than enhancing the capacity of the sector. The budgetary provisions towards agriculture and allied sectors should be directed towards bringing sector-wide improvement by addressing the need for community-based infrastructure development. Therefore, budgetary allocations towards schemes such as RKVY, NFSM, etc. should be prioritised. Secondly, it needs to step up expenditure in allied sectors to make these sectors more viable for resource-poor households. Thirdly, farmers and rural workers require handholding support. Therefore, budgetary allocations must also address the research, education and extension services at the grassroots levels. Lastly, public expenditure framework requires strong cooperative federalism whereby provisioning of resources from the Union Government should be supplementing the resource requirements of States for the sector.