
It is heartening to see that the government is finally considering agriculture to be the first engine of growth. It should just be that till we are able to fix the employment problem and ensure food security for the world’s largest population, which seems to be an intractable problem at this point, as the Economic Survey has clearly pointed out. Agriculture drives growth in other sectors too. We will be successful only if our good intentions are supported by context appropriate policies and resources that help implement those policies effectively.
Are our policies consistent with the farming community’s economic reality?
During the last decade, we have had three new schemes for supporting agriculture – crop insurance, interest subsidy and the direct transfer (PM-KISAN). A direct transfer programme does not guarantee that the money is spent on improving the farming community’s ability to invest. Crop insurance helps in extreme cases. Both schemes don’t help farmers get a fair price for their produce. Consequently, an average farmer’s ability to invest and take risks is always compromised.
PM-KISAN gets 46.1% and Crop Insurance and MISS (Modified Interest Subvention Scheme) gets 27.4% of the budget. We do know that an average farmer in India is poor or would, at best, make it to the lower-income group. An average farming family needs risk capital and providing an interest or insurance subsidy does not take it too far.
A market-based solution can help only when the farmers have the ability to invest and can deal with large private sector players on equal terms.
We, therefore, need the government to invest in agriculture infrastructure – the same way we have done for roads and railways, but without the costs that tolls are imposing on the economy – and provide the community the required services without having to risk their limited capital or be at the mercy of large corporations or informal lenders.
Are our good intentions supported by adequate resource allocation?
Since 2018-19, the budget increase for agriculture has been only 6.8% per year, not much higher than general inflation. During this period, the sector has supported 28% more people – those who had migrated back to rural areas, post the pandemic. Even if we include the allocation for rural development as the expenditure for agriculture, it does not change much - the growth in rural expenditure has been just 7.6%.
The aggregate budget (FY 2025-26) for the Ministry of Agriculture, including research and education, is lower than the current one by 2.54% and that too without accounting for inflation. During the coming year, the budgeted growth in expenditure for rural development is just 8%.
Dhan-Dhaanya Krishi Yojana (PM-DDKY)
The budget proposes to focus on low-productivity districts through PM-DDKY. While we do not have the district names as yet, it is likely that the farmers in these districts are poorer and less informed than their counterparts elsewhere in the country. They would, therefore, need far more financial, economic, and technical support. I could not find any allocation in the budget under Developing Agri Districts Programme or Prime Minister Dhan-Dhaanya Krishi Yojana. I did find allocation for other missions mentioned in the budget. The most important questions, therefore, are:
What is the budget allocation for Prime Minister Dhan-Dhaanya Krishi Yojana?
What is the purpose of budget support?
What is the role of private sector business and farming families?
Who will receive the support – farmers or intermediaries?
What is the period for implementation, as it is likely to take more than one year to achieve the required results?
Anticipating our food requirements and investing consistently
We need a much longer perspective for investment in agriculture. We must anticipate our food requirements and provide public services to the farming community consistently so that we don’t have to depend on imports or end up with knee-jerk trade policies. If we do not, we will be solving the same problem more than once, as is the case with raising the production level for pulses. We do know that the demand for pulses, fruits, and vegetables is expected to grow as income grows. Could we not have continued investing and not allowed it to become a problem again in less than a decade?
Finally, we need a significant amount of investment to deal with the adverse impact climate change is likely to have on agriculture. Neither our farmers nor the private sector has the ability to take risk of this investment that involves using newer technologies and equipment that we will have to import. Crop insurance subsidy is not the solution. We need a mission that focuses exclusively on investing to protect ourselves from climate change and ensuring long-term food security.