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Budget 2019: Farm crisis biggest challenge for FM Nirmala Sitharaman, but her maiden Budget may not solve it

Anil Nair
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The biggest challenge for finance minister Nirmala Sitharaman while presenting her maiden Union Budget on July 5 will be the crisis in the country’s agriculture sector. The interim Budget presented by Piyush Goyal in February had taken a bold step to address the crisis by introducing the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme for providing support to the country’s small and marginal farmers. The Modi government in its second term further sweetened the deal in its first Cabinet meeting by expanding the scope of the scheme to cover all the farmers who will now get Rs 6,000 each a year in their bank accounts, irrespective of the size of their land holdings. The reworked scheme will entail an expenditure of Rs 87,217.50 crore in the current financial year.

While there is near unanimity on the need for such a scheme to mitigate the crisis faced by the farmer community, the step may not offer a solution for the problem. A lasting solution to the agricultural crisis is outside the scope of the Budget. The government needs to unleash bold reforms in the sector and push the modernisation of agriculture to fix the problem at hand.

Here’s an agenda for the Modi government to mitigate the farm crisis.

Consolidate holdings, modernise farming

Out of India’s estimated 14.5 crore farmers, 12.5 crore (86%) are small and marginal farmers with land holdings less than 2 acres. This is the section affected most by the farm crisis. Organising them under cooperatives and producer organisations could give them access to cheaper funds and enhance their bargaining power. This will also help the sector modernise, preparing it for the latest agricultural practices that are less dependent on land and water. Consolidation could also pave the way for extensive use of machines to replace depleting base of farm labour. New technologies could make the agriculture sector more efficient and sustainable.

Modernise agricultural markets

The biggest problem faced by agriculture globally is the price volatility of farm produce. The prices crash immediately after harvests with worrying regularity, while the consumer continues to pay higher prices. The huge difference between the prices offered to the farmer and those paid by the consumer is the result of inefficiencies in the market. The system of minimum support price declared by the government seems to have collapsed as most farmers are forced to sell their produce below the MSP. The only way out is allowing the market to arrive at prices. The government may step in to compensate the farmer in case of a steep fall in prices.

Support food processing industry

India has achieved self-sufficiency in agriculture. The country must now look at building a robust food processing industry, which will ensure sustainable demand for farm produce and remunerative prices to the farmer. Food processing industry can bring prosperity to India’s impoverished villages by strengthening the supply chain and boosting exports. The sector, which offers employment to close to 12.8 per cent of the workforce in the organised sector and 13.7 per cent of the workforce in the unorganised sector, could be a force multiplier when it comes to reducing poverty and addressing rural distress.

Left with little fiscal room to offer further cash assistance to farmers, the Modi government may go ahead and implement some of these steps sooner than later.