At the time it was presented, and in the context of the Assembly elections in five States — now underway in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa — the Union Budget was expected to contain measures to boost consumption expenditure. But the Government chose instead to focus more on capital expenditure. There were no major announcements on agriculture or rural development. Given the recent turmoil as a result of the farmers’ protests and the repeal of the farm laws, this was a little surprising. However, a closer look at the Budget presents a different picture.
Allotments, key subsectors
It is important to look at the budgetary allocations for agriculture from the perspective of agricultural growth and farmers’ income. Agriculture has registered a robust performance during the COVID-19 pandemic and has clocked decent growth rates of 4.3% and 3.6% during 2019-20 and 2020-21. Growth is projected to be about 3.9% in 2021-22, which is a very satisfactory performance indeed! This performance may partly explain the lack of any extra focus on agriculture. However, there is a different story. Within agriculture, livestock and fisheries are two subsectors that have shown an average annual growth rate of 8% or more in the last five years.
These two subsectors roughly contribute about 33% of the gross value added in agriculture. Also, as per the Situation Assessment Survey 2019, more than 15% of income is derived from livestock subsector. Thus, from a growth perspective as well as the viewpoint of farmers’ income, livestock and fisheries are important. In keeping with this, these two subsectors have attracted decent allocations in the Budget.
An increase
The allocation for livestock health and disease control — a major concern for those working in the sector — has rightly been increased from ₹886 crore to ₹2,000 crore, a 126% increase. The allocation for the National Livestock Mission has also increased by more than ₹100 crore (42%). Similarly, the Pradhan Mantri Matsya Sampada Yojana, a flagship programme of fisheries, has received an increase of about ₹679 crore (57%). Value addition in agriculture has also got increased attention. The production-linked incentive scheme for food processing has received a huge increase, from ₹10 crore to ₹1,022 crore (a 10,000% jump). Similarly the allocation for micro food processing, which can help in really small enterprises such as pickle and jaggery making, has increased by 125% to ₹900 crore.
Within the crop subsector also major changes in allocations have been made. In keeping with the broad thrust on capital expenditure in the Budget, the allocation for the Rashtriya Krishi Vikas Yojana, or RKVY (a programme to “ensuring holistic development of agriculture and allied sectors”) has been increased by a whopping ₹8,000 crore, a 400% increase. This programme provides a lot of flexibility to States to devise and implement their own agricultural development programmes.
However, it needs to be mentioned here that various other programmes such as the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) — to improve farm productivity — the Paramparagat Krishi Vikas Yojana (a programme to “increase soil fertility and also the production of healthy food through organic practices” among other things), etc. have been brought under the RKVY fold this year.
Even after factoring in this inclusion, the allocation has gone up by more than 90%, which is substantial. Continuing the focus on agri-infrastructure, the allocation for the Agriculture Infrastructure Fund (AIF) has been increased by 150% to ₹500 crore. The central sector scheme called the “Formation and Promotion of 10,000 Farmer Produce Organisations (FPOs) has also received an allocation of ₹500 crore (100% increase).
But a decrease here
Turning to allocations for output price support, the policy appears to be a little unclear at present. For instance, the Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA), which is the flagship programme to provide enhanced Minimum Support Price (MSP) of 50% above the cost of production to farmers (started with a lot of expectation in 2018), has received an allocation of just ₹1 crore! The only conceivable reason for this could be the impending formation of the committee to address the issue of MSPs, which was announced by the Prime Minister while announcing the repeal of the farm laws. The allocation for the price support programme of pulses and oilseeds (the Market Intervention Scheme and Price Support Scheme, or MIS-PSS) has decreased by 58% to ₹1,500 crore. The allocation for price stabilisation fund, meant to address extreme volatility in the prices of perishables, has declined by ₹750 crore (33%). The allocations for price support have declined; so too the budgeted allocation for important subsidies. The budgeted estimate of fertilizer subsidy has shown a decline of nearly ₹35,000 crore (25%). Similarly, the food subsidy has shown a decline of nearly ₹79,000 crore (28%). Such a large decline in fertilizer and food subsidies does not appear achievable.
Not much for NREGA
Agriculture is not a stand-alone activity but is intrinsically linked to overall rural development. With nearly 40% of income being derived from wages by agricultural households, it is imperative that rural development is looked at in conjunction with agriculture. Most major rural development programmes such as the Pradhan Mantri Gram Sadak Yojana (connectivity to unconnected habitations), the Pradhan Mantri Awas Yojana (housing for all in urban areas), and the National Rural Livelihood Mission have received small increases in allocations. One exception is the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). This flagship rural employment programme, which has been instrumental in reducing distress in the rural economy during the waves of the COVID-19 pandemic, has received lower allocation — by about ₹25,000 crore (25% decrease) from RE 2021-22 of ₹98,000 crore. This is a large decline indeed! A plausible reason is the possible reduction in the need for MGNREGS with the decline in the severity of the pandemic.
Transformative steps
The announcement of measures to promote kisan drones and encourage start-ups to improve value chains of farm produce are welcome steps. The adoption of modern technology in agriculture should not only help reinvigorate the rural economy but could also possibly encourage the younger generation to consider agriculture as a career option — generally perceived to be a laborious and drudgery-laden sector.
Finally, though there were no big ticket announcements on agriculture and rural development, the allocations appear to be in the right direction. The thrust seems to be on important subsectors such as livestock, fisheries and food processing and also on improving infrastructure in the crop sector. Although the allocations on MGNREGS and food and fertilizer subsidies are somewhat lower, there are positives in terms of adoption of technology. The Budget is in the right direction for agriculture. And now, implementation holds the key!
C.S.C. Sekhar is Professor of Economics, Institute of Economic Growth, University of Delhi. E-mail: csekhar@iegindia.org
