Budget expectations


Budget expectations

Doubling Farmers’ Income by 2022

Arindam Guha

Agriculture continues to be one of the largest livelihood and employment generating sectors in the country, with about 44 percent of the population deployed in this sector1. However, its contribution to India’s 2018-19 GDP was less than proportionate at 14.4 percent2 . In a bid to address this situation, the government has set itself the target of “Doubling Farmers’ Income” by 2022. Some key levers for achieving this are mentioned below:

  1. Diversifying towards high-value crops 
  2. Increasing productivity through adoption of technology 
  3. Rising cropping intensity 
  4. Securing better trade terms for farmers 
  5. Redeploying surplus manpower engaged in farming to non-farm and subsidiary activities

To achieve this, Budget 2019−20 had provided for increased outlays on a number of schemes administered by the Ministry of Agriculture that include Pradhan Mantri Fasal Bima Yojana, interest subsidy for short-term credit, PM-Kisan, Market Intervention and Price Support, Agriculture Mechanisation and Green Revolution. The total allocation across central-sector schemes and centrally sponsored schemes in agriculture almost doubled from INR 67,800 crore in 2018−19 to INR 125,000 crore in 2019−203 .

The following are some additional measures that may be considered as a part of Budget 2020−21:

  • In addition to the schemes announced by the Ministry of Agriculture, a number of related schemes exist under other ministries that need to work in close coordination to achieve the objectives set out above. These schemes include the following:
    a) National Rural Livelihoods Mission (alternate livelihoods for self-help groups, farmer producer organisations, etc.) and Pradhan Mantri Krishi Sichai Yojana (watershed development component) administered by the Ministry of Rural Development
    b) Pradhan Mantri Kisan Sampada Yojana (to operationalise food parks, infrastructure for agro-processing clusters; integrated cold chains and value addition; integrated development of tomato, onion, and potato value chains; etc.) under the Ministry of Food Processing Industries
    c) Pradhan Mantri Krishi Sichai Yojana (for accelerated irrigation support) administered by the newly established Ministry of Jal Shakti

    The 2019-20 budgetary outlay on the above schemes was an additional INR 15,000 crore. As the above-mentioned schemes are part of an integrated strategy to increase agriculture sector productivity and farmer income, the requisite policy and institutional mechanisms to ensure effective coordination between the different ministries/departments/agencies at the central and state government levels need to be put in place. An immediate beginning can be made by introducing shared outputs and outcomes as part of the Budget 2020−21. 
  • It is fairly well accepted now that consolidation of individual farmers under farmer producer organisations (FPOs) is key to bringing in economies of scale while adopting technology, leveraged buying, market linkages, and financing. However, while more than 5,000 FPOs have come into existence across the country, they continue to be face challenges in the form of limited access to finance; barrier to selling agriculture produce directly to wholesale markets due to regulations such as the APMC Act (still exists in a number of states); high regulatory burden given their limitations in terms of human resources capacity, etc. To address some of these issues in Budget 2020−21, the government may consider:
  1. making a specific sub-allocation for registered FPOs in relevant schemes affecting the agriculture sector’s value chain whether these are administered by the ministries of agriculture, food processing industries, rural development, and jal shakti; 
  2. simplifying procedures to avail financing support under various schemes, such as Kisan credit cards, interest subsidy support and credit guarantee support, to FPOs in lieu of their member farmers against their individual entitlement while resolving regulatory issues around providing collateral/security at the FPO versus individual farmer level; 
  3. providing exemption on income tax on other income of registered FPOs for an initial period, as well as allowing simplified regulatory filings under the Companies Act during this period; and
  4. making disbursement to states under select centrally sponsored schemes, such as Market Intervention and Price Support and Green Revolution (which can support FPOs, subject to specific relaxations granted to FPOs under applicable state regulations, such as APMC Act).

[1] Source: Economic Survey, 2018-19

[2] Source: Economic Survey, 2018-19

[3] Source: Budget 2019-20 – Expenditure Budget

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