What should be the main focus of the 2022-23 budget for agriculture?
Agriculture has remained at the center of political and academic discussions in the country for various reasons over the past decades. Among other things, the agricultural crisis has remained an unchallenged issue despite a plethora of political and economic promises time and time again. In an effort to address one of the most pressing issues, namely the doubling of farmers’ incomes, a number of policy and budget announcements have been made over the past five years. As part of policy actions, in 2016, the Union government adopted a strategy to double the income of farmers by 2022. As a result, the quantum of budgetary allocations to agriculture and its related sectors has increased. trended upwards since then, which was seen as a welcome development. stage. The total expenditure of the Union government towards the agricultural sector has increased from Rs. 46,361 crore in 2017-18 to Rs. 135,854 crore in 2021-22 (BE). However, an approximately tripling of budget allocations does not seem to have any visible positive impact on the condition of farmers. Even if we take farm income as the narrower definition of general farmer well-being, there doesn’t seem to be much improvement in recent years.
A comparison of income data from two series of the National Sample Survey (NSS), i.e. 70and (2012-13) and 77and (2018-19) suggests that nominal farm household income from all sources (which includes wage income, land rental income, crop production income, animal husbandry income farm income) increased by about 29.7% (average monthly income from Rs. 6,426 in 2012-13 to Rs. 8,337 in 2018-19). It has grown by 4.3% per year against 10% recommended by the Dalwai Committee as a plank to double farmers’ income by 2022. We have also calculated the real income after adjusting for the magnitude of inflation with nominal income using the consumer price index. (combined CPI). The average monthly real income of all categories of farming households at the All-India level actually declined from Rs. 6045.2 in 2012-13 to Rs. 2%). There is little revenue data after 2018-2019, but the situation posed by COVID-19 must have further affected the revenue outlook for the sector, as it has for the economy as a whole. The past few years have seen an unimaginable loss of livelihoods and income across India. This may have worsened farm income in both nominal and real terms. It is thus important to question the approach of policy and budgetary orientations rather than the effectiveness of public spending in increasing farmers’ incomes.
Given the scenario, upcoming budgets should prioritize the following while announcing budget provisions for agriculture.
Priority to centrally sponsored plans
There has been a negligible change in Union Government expenditure for Central Government sponsored schemes in budget expenditure allocated to the Department of Agriculture, Cooperation and Family Welfare (DAC&FW) since the strategy to double farmers’ incomes has been adopted. Allocations to these programs have increased from Rs. 11,978 crore in 2016-17 to Rs. 17,408 crore in 2021-22 (BE). On the contrary, allocations to central sector programs increased significantly from Rs. 24,594 crore to Rs. 104,118 crore during the same period. Since centrally sponsored schemes are designed on the principle of sharing funds between Union and State governments, they encourage the latter to invest more in the sector. However, a lower budget priority given to these programs by the Union government would also replicate the same at the state level. As a result, budget expenditures in some of the crucial schemes such as Rashtriya Krishi Vikas Yojana (RKVY), the National Food Security Mission (NFSM), the National Horticulture Mission (NMH), etc. did not pick up the pace we should have expected.
Priority to basic interventions
The share of budget allocations in recent years has been heavily skewed towards cash schemes. Accordingly, the increase in expenditure in the agricultural sector over the past four to five years has been due to 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 schemes in the total budget allocation for various schemes under the DAC&FW and the Ministry of Fisheries, Livestock and Dairy reached 79% in last year’s budget. As a result, only 21% of budgetary expenditures were allocated to “core” programs, mandated to strengthen community-led infrastructure and support for farmers. In addition, cash schemes are time-limited and exclusive in nature (excluding the landless, women farmers and tenants, etc.). These schematic allocations to solve the problem of doubling farmers’ incomes seem to address only the symptoms of the short-term agrarian crisis and not the root cause. It is therefore high time to rethink the fiscal framework with a view to building the infrastructure that can support agriculture and related sectors to ensure long-term viability and hence sustainability.
More emphasis on allied sectors
Since the agricultural sector is highly vulnerable to weather conditions, the Dalwai committee also mentioned the promotion of related sectors for rural households. It was found from the NSS data that the income of marginal farmers from livestock farming decreased to around -43% in 2018-2019 compared to 2012-2013. Except for the large category of farm households, it decreased for all categories of farmers, even in nominal terms, from 2012-13 to 2018-19. However, the Union government had created a separate Ministry of Animal Husbandry, Dairy and Fisheries in 2019 to give a boost to the allied sectors. But the pattern of budget allocations to allied sectors has not changed much. The share of budget allocations to fisheries, livestock and dairy remained around 3 percent of total expenditure on agriculture and related sectors.
Need for global budgeting
It has been well argued that the crisis in agriculture is deep rooted and the result of an accumulation of distress over the years. The current budgetary approach only deals with the consequences of the agrarian crisis and aims for short-term relief. Therefore, the policy direction should have been to tackle the root cause rather than focus on short-term measures. In addition, investments are made in interventions designed to reach individual farmers rather than building sector capacity. Budgetary provisions for agriculture and related sectors should aim to bring about sector-wide improvements by addressing the need for community infrastructure development. Therefore, budget allocations to such schemes as RKVY, NFSM, etc. should be priority. Second, it must increase spending in related sectors to make those sectors more viable for resource-poor households. Third, farmers and rural workers need manual support. Therefore, budget allocations should also cover research, education and extension services at the local level. Finally, the public expenditure framework requires a strong cooperative federalism in which the resource supply of the Union government should complement the resource requirements of the states for the sector.