Budget 2021 Leaves Agriculture Behind

At a time when protesting farmers on Delhi's borders are asking for an assured income by way of an assured price, Budget 2021 was expected to take the wind out of their sails by announcing provisions for enhancing farm incomes. More so at a time when economists are calling for measures to prop up rural demand, the Finance Minister was expected to open up the purse strings for providing more money in the hands of the agitating farmers by way of direct income support.

Instead, the budgetary allocation under the PM-Kisan Samman Nidhi scheme has been reduced from ₹75,000-crore to ₹65,000-crore this year. Under this scheme, land-owning farmers are given a cash transfer of ₹6,000 per year in three instalments. I was expecting landless farmers to have been included in this scheme. Considering that agriculture was the only bright spot in the first two quarters, it was expected the government would enhance the allocations to ₹18,000 per year, which means making a budgetary allocation for an additional ₹1.5 lakh crore.

However, the budget for the agricultural sector remains almost the same as last year. This year, the budget allocation is ₹1.48 lakh crore (budget estimate) against ₹1.45 lakh crore (revised estimate) last year.

Although agriculture credit limit has been raised from ₹15-lakh crore to ₹16.5-lakh crore in this financial year, the continuing agrarian distress calls for measures to pull farmers out of the debt trap. This requires enhanced public sector investments in agriculture and also providing more income to farmers. As per RBI, between 2011-12 and 2017-18, public sector investment in agriculture was only 0.4 per cent of the GDP. Therefore the proposal to create an agricultural investment fund by putting a cess on petrol and diesel is a welcome step, but the best way forward would have been to make definite provisions for agricultural investment like the announcements made for rail, road and capital investment.

What agriculture needs as a priority is to create adequate marketing infrastructure. There are close to 7,000 APMC regulated mandis in India, and if a mandi needs to be created in a radius of 5 km, the country requires 42,000 mandis. Knowing that the promise of upgrading 22,000 village haats and linking them with eNAM hasn't been very encouraging, the emphasis on creating rural marketing infrastructure cannot be ignored any more.

Budget 2021 has come at a time when massive protests by farmers are going on for several months, Finance Minister did mention how the amount of Minimum Support Price (MSP) for crops like wheat, paddy, pulses and cotton has gone up in recent years, and also gave the number of beneficiaries. Protesting farmers are however demanding MSP to be made a legal right for farmers, which means no trading to be allowed below the price for all the 23 crops for which MSP is announced every year.

The claim that MSP for all crops provides for 50 per cent profit over the cost of production (technically called as A2+FL) has been contested by farmers. As per the Swaminathan Commission recommendations, MSP should comprise 50 per cent profit over the comprehensive cost (C2 cost). To illustrate, Punjab farmers would have gained by an additional ₹14,296 crore in 2020-21 marketing year if they had received MSP as per the Swaminathan Commission.

More money in the hands of farmers is the surest way to achieve Prime Minister's vision of Sabka Saath Sabka Vikas. This, in turn, would create more rural demand, thereby revitalising the wheels of the economy. At a time when the pandemic has contracted the economy, generating rural demand would not only act as a booster dose but act as a rocket dose for economic growth. A vibrant agricultural sector would create huge employment opportunities by helping to create viable livelihoods. Agriculture, therefore, has the potential of turning into a powerhouse of economic growth.

Devinder Sharma is an agricultural economist and policy expert

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