Priority to Rural and Agricultural Sector in budget will energise India


There was slower growth in rural and agricultural sectors in the year 2017-18; budget should focus on rejuvenating the growth of these sectors as still more than 68 per cent of India’s population lives in rural areas. The importance of satisfying rural voter is important in this election year budget. It also makes good economic sense as every rupee spend on public expenditure in rural areas will have more power to reduce poverty than spending in urban areas. As per official statistics, percentage of population living below poverty line is double (25.7 per cent) in rural areas than urban area (13.7 per cent). The estimated agricultural growth for 2017-18 was only 2.1 per cent and widespread farmer distress is evident across many states. Farmers’ incomes are lower due to decline in output prices and increased cost of inputs like fertilisers and labour.

Rural non-farm sector

The non-farm sector is now contributing about 2/3rd of the rural economy and mostly it is informal in nature with low wage rates. Rural entrepreneurs are complaining about stagnant demand, higher cost of production, lack of logistics, frequent power cuts and lack of skilled manpower. They are also complaining of procedural hurdles and complexity of shifting to GST from the existing tax system.  Although adverse impacts of demonetisation and GST are faded away, there were no visible signs of positive impacts in rural areas except the increase in bank deposits.

Given that this budget keeps an eye on the forthcoming general elections, budget is an opportunity to provide big relief to distressed farmers and should provide enabling environment to kick start rural growth with more allocation of funds along with appropriate reforms and schemes.

Reforming ongoing development schemes

Since last three years, government of India is running many flagship programmes to help farmers and rural sector. The ongoing flagship programmes like Rashtriya Krishi Vikas Yojana (RKVY) to increase farmers’ incomes, Pradhan Mantri Krishi Sinchayee Yojana ( PMKSY) to increase area under irrigation, Pradhan Mantri Fasal Bima Yojana (PMFBY) to increase coverage of crop insurance and e-National Agricultural Markets (NAM) for increasing market efficiency and Soil Health Card (SHC) Scheme to reduce costs and to increase profits need to be given high priority with more fund allocation along with suitable modifications based on the past experience.

Increasing transparency and efficiency should be the top priority. Now all the assets created under different schemes like RKVY are geo-tagged for better monitoring and identifying end-users. From this year onwards, fertilisers subsidy will also be linked to Aadhaar. It is also recommended that all land records and also soil health cards should be Aadhaar linked for better monitoring, transparency and targeting of subsidies. Innovative schemes like Telangana governments investment subsidy scheme can be replicated especially in most backward districts of India to help farmers in increasing private investments in agriculture.

Rural construction engine of growth

Since 1980s, engine of growth of rural economy shifted from farm to non-farm sector and it is contributing to about 60 per cent of the incomes in rural India. Rural construction sector absorbed 74 per cent of the new jobs created in non-farm sectors in rural areas between 2004-05 and 2011-12. Government has to focus on rural housing and roads to continue this growth and to provide gainful employment for semi-skilled and unskilled labour. There was a need for skill-oriented job creation under MUDRA.

Rural infrastructure and Investment

Dalwai committee on doubling farm income recommended that India has to invest about six lakh crore in rural infrastructure like warehouses, cold chains and market infrastructure to link farmers to markets. Given that public funding is limited due to fiscal constraints, private sector needs to be encouraged to invest. Private sector contribution is only 2 per cent of annual investment in agriculture sector. If proper incentive structures exists private sector can increase their share of rural investments with the support of government in terms of viability gap funding.

Employment guarantee and PDS

The role of employment guarantee programme (MGNREGA) and Public Distribution System (PDS) is noteworthy as social safety net and also in removing poverty. Some studies pointed out that if MGNREGA and PDS function well in the rural areas, they lift incomes of the poor on average 12 per cent, which is a significant amount. Use of IT technology in reducing corruption and creation of durable assets with geo-tagging should be the priority under MGNREGA. PDS should be more decentralised with inclusion of nutria-rich cereals like millets to increase demand for dryland farmers produce.

Solving problems of tenant farmers

Tenants have to pay about 30 per cent to 40 per cent of the average sales value of production to landlords for leasing-in land in most of the villages. This is unbearable if the crop fails, as it happens once in every three years. There is increased distress and suicides among tenant farmers. Further, tenants are not eligible to avail of government schemes like subsidised seed, bank loan and subsidies on drip etc. There is a need for a clear policy on land-lease markets in line with the recent NITI Aayog model land-lease act to reduce burden on the tenants at the same time protecting the ownership rights of landowners.

Income support to farmers and rural artisans

In the recent past, input prices like fertilisers and labour are increased, but output prices like prices of wheat, pulses, onion and tomatoes are decreased resulted in less profits to farmers. Similar situation was also observed in rural and khadi industries. Hence, there is a need to focus on price or income support not only for agricultural sector but also to village and khadi industries.

The prices of farm produce is more volatile now, there was an urgent need to increase funds allocation under Price Stabilisation Scheme and also implement  Market Assurance Scheme(MAS) in distress districts as suggested by Dalwai committee on doubling farmers’ incomes to reduce price risk of farmers.

Big push to farm and rural sector

Overall, this budget needs to give extra helping hand to the farmers, village artisans and rural industries to increase and stabilise their incomes, so that their future is secured and medium term goal of doubling farmers’ income by 2022 will be achieved. Budget should enhance funds allocation to rural and agricultural sector at least by 30 per cent even if it increases the fiscal deficit, as it will have lot of positive impacts in terms of increasing employment and income creation  (Writer is Director, National Institute of Agricultural Extension Management, MANAGE, Hyderabad).

(The writer is the Director (Monitoring and Evaluation), National Institute of Agricultural Extension Management (MANAGE), Ministry of Agriculture and Farmers Welfare, Hyderabad)

A Amarender Reddy