Grim fine print of ‘farm’ budget

The performance of the agricultural sector under Narendra Modi would be judged in 2019 by a single indicator: his grand promise to double per capita agricultural income between 2015 and 2022.

Published: 02nd February 2018 02:27 AM  |   Last Updated: 02nd February 2018 07:27 AM   |  A+A-

Representational Image. | Express Photo Service

Express News Service

The performance of the agricultural sector under Narendra Modi would be judged in 2019 by a single indicator: his grand promise to double per capita agricultural income between 2015 and 2022. However, available data do not indicate any satisfactory progress towards that goal. The year 2016-17 was a satisfactory year as far as the overall agricultural growth rate was concerned.

However, there has been a sharp deterioration in 2017-18, the ongoing year. To begin with, if gross value added (GVA), year-on-year, grew at 4.1 per cent in Q2 (July-September) of 2016-17, it grew at just 1.7 per cent in Q2 of 2017-18. For 2017-18 as a whole, the growth rate of GVA in “agriculture, fishing and forestry” is projected to be only 2.1 per cent. Production of foodgrain grew by 10.7 per cent in Q2 of 2016-17; the corresponding growth rate in Q2 of 2017-18 was just 2.8 per cent.

The poor growth rate of agriculture in 2017-18 has resonated in the surge of farmers’ protests over the last few months. The results of the Gujarat Assembly polls were interpreted by most observers as reflective of a deep agrarian anger. The farmer protests were centred around two major demands: first, the government should announce minimum support prices (MSP) at 150 per cent of the C2 cost of production. Secondly, the government should announce a meaningful debt relief package to ameliorate agrarian distress.

In Budget 2018-19, Jaitley has announced that he would raise MSP to 150 per cent of the cost of production. However, it is unclear how sincere the government is in making this promise. One reason for this suspicion is a false claim made in the same breath by Jaitley. He claimed that the government had “declared…MSP…for the majority of rabi crops at least at one and a half times the cost involved”. Data show that the rise in MSP over cost of production in rabi 2017-18 was 35.1 per cent for wheat, 18.4 per cent for barley, 25.6 per cent for gram, 17.6 per cent for lentil, 33.4 per cent for rapeseed and mustard and -6.4 per cent for safflower. Only time will tell if the government will keep its promise. Also, there is no clear budgetary allocation made to meet this promise.

The other major promise made by Jaitley in the budget is related to agricultural credit. There was no announcement to provide any relief to indebted farmers. But he claimed that the government would increase the supply of agricultural credit from Rs 10 lakh crore to Rs 11 lakh crore. This is not a budgetary allocation; it is to be met by banks. Still, such a mechanical 10 per cent rise in agricultural credit pays no attention to the sharp rise in the costs of cultivation, which necessitates an increase in credit limits for crops. It also pays no attention to including unbanked farmers into the net of formal banking.

There is no announcement to revive the cooperative credit network, which is in deep crisis post-demonetisation. Finally, there is no attention paid to ensure that agricultural credit reaches farmers. In 2016, about one-fourth of the agricultural credit was given by urban branches. Only about 41 per cent of agricultural credit was given to small and marginal farmers (represented by loans of up to Rs 2 lakh). About 14 per cent carried a loan size of more than Rs 1 crore, going primarily to institutions and corporates. Credit is simply not reaching the farmers. In sum, there is no special effort to either boost agricultural growth or give relief to distressed farmers. It is political rhetoric wrapped in jumlas.

Highlights:

MSP for unannounced kharif crops to be set at 1.5 times production cost to boost farmers’ incomes; volume of institutional credit for agricultural sector to be raised to Rs 11 lakh crore from Rs 10 lakh crore.

22,000 rural haats to be upgraded into Gramin Agricultural Markets (GRAM).

Custom Duty for imported phones - 15% pre budget; 20% post budget; Prices of larger televisions to rise.

R Ramakumar

Professor, Tata Institute of Social Sciences

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