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Budget 2019: Beyond farmer loan waivers, the FM unveiled fundamental measures for long-term Farm sector stability

Budget 2019, farm distress, PMKISAN, MSP, MGNREGA, Pradhan Mantri Gram Sadak Yojana, Kisan Credit Card

By Naveen P Singh

The suspense has been unveiled. Most of us were aware that agriculture will get the top billing, and the focus of this year s Budget will be on addressing key issues pertaining to farm distress, as elections 2019 will be fought on the farmland. But the form in which it will be done has been unveiled in the spends. The finance minister, while presenting the Interim Budget, launched a number of measures focused around major issues surrounding the economics of the granaries of the country.

The government launched the Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) that will offer direct income support of Rs 6,000 per year to small and marginal farmers having landholding of less than 2 hectares, and will address the problems of indebtedness that prevented them access to funds once and for all in its own way. It is a known fact that land fragmentation on account of repeated divisions has contributed to rural distress. Landholdings have doubled in the past 45 years, from 7.1 crore in 1970-71 to 14.57 crore in 2015-16, resulting in decline in the average size of farms by more than 50%, at 1.08 hectares. As per provisional estimates of the Agriculture Census 2015-16, there are 12.56 crore marginal and small farmers having less than 2 hectare holdings and together constitute 86.21% in 2015-16 against 84.97% in 2010-11. The PM-KISAN will address discontent among such small farmers as the sum will meet the input cost for cultivation and, most importantly, will be delinked from crop prices. The good news to eligible farmers is that the scheme would be made effective from December 1, 2018, and the first instalment for the period up to March 31, 2019, would be paid soon. This scheme is in line with the Rythu Bandhu scheme of Telangana, which transfers Rs 4,000 per acre per crop on per-acre basis without a holding size limit. For two crops in a year, it makes up to Rs 8,000 per year. The KALIA scheme of Odisha provides direct benefits to krushaks (farmers).

Also read| Interim Budget 2019: Promises, pitfalls for farm sector

There have been no dearth of schemes, but the policies for elevating the rural economy always have had a lag and effectiveness in implementation is an area of concern. The current move seems to address this lag by directly monetising farmers.

In other measures to support the rural economy, Rs 60,000 crore has been set aside for MGNREGA. Also, there is now Rs 19,000 crore for the Pradhan Mantri Gram Sadak Yojana as against Rs 15,500 crore in the previous year to provide alternative employment opportunities. However, care should be taken in implementation at the granular level, in such a way not to wean away labour from peak season farming activities. The government has announced to build 1 lakh digital villages in the next five years. In order to promote fisheries, the government has proposed a separate department of fisheries and extended the benefit of 2% interest subvention to farmers pursuing animal husbandry and fisheries, for those who avail loans through the Kisan Credit Card. Diversification of farms will ameliorate the problems surrounding dependence on a single economic activity of farming. In all, the ministry of agriculture & farmers welfare could corner Rs 1,40,764 crore as BE in 2019-20 (a large sum for PM-KISAN) as compared to RE of Rs 79,025.74 crore, but a very less proportion totalling only Rs 8,078 crore (65% is administrative and logistics expense) has been allocated to agricultural R&D in 2019-20, which is almost the same as the current fiscal RE. This warrants an increase in the agricultural R&D spending as the payoffs have been quite significant in the past and will grease the wheels of sustainable economic development.

A key area of concern remains lack of measures to address falling crop prices. MSP has been sharply hiked for 22 crops, but there are no takers at the support price. The fall in prices has been attributed to record production and decline in global crop prices. As per the Fourth Advance Estimates, foodgrain production during 2017-18 has been at a record 284.8 million tonnes, higher by 3.5% against previous year. The task of protecting farm incomes from price instability remains to be fulfilled by the policymakers in the coming years.

Thankfully, the government preferred to monetise farmers instead of waiving off farm loans. Elections are round the corner and, obviously, farm loan waiver remains the hot topic addressing the symptoms around farm distress, but not curing the disease. The Budget has unveiled some fundamental measures for long-term stability of the farm sector. Let us sincerely hope that budgeted measures will ameliorate the economics of small and marginal farms, and go a long way in structurally building up the farm sector.

The author is principal scientist, ICAR-National Institute of Agricultural Economics & Policy Research (NIAP), New Delhi. Views are personal