In early 2019, the interim budget heavily focused on farmer and rural development and had placed the rural consumer and the ‘aam aadmi’ at the very centre of India’s growth ambition. Agriculture continues to be the focus for the government with its three-point agenda around doubling the farmers’ income, minimising risk of extreme weather conditions and supporting the farmer with credit facilities. Considering the current demographics today, below are our views on expectations from the upcoming budget for the agriculture sector.
Doubling farmers’ income
The government has been stressing on doubling farmers’ income in order to ensure their welfare and address the agrarian crisis. Doubling income is a function of increasing productivity, minimising cost of production and focusing on improving crop value realised by farmers.
There could be several efforts directed to provide adequate water that could be used for modern irrigation and advanced farming techniques. This will have an impact on the overall crop productivity which may lead to overall input efficiency.
We could also expect the government to focus on schemes to incentivise farm mechanisation for improving yields for farmers.
Reducing cost of production:
Under Rashtriya Krishi Vikas Yojana (RKVY) programme the government allocates funds to increase yield and maximise returns for farmers.
Various storage facilities are proposed to be built near farms that would allow them to hold their produce without getting damaged until market prices go up thereby making it profitable enough for the farmers.
Push on GST relief towards farmers is expected especially on some items like milk products alongside the various tax exemptions to agriculture co-operatives.
Increasing price realisations:
Efforts could be made to reduce the middlemen between farmers and consumers, reducing costs and improving the realisation of farmers for their produce.
The government might also consider creating funds to ensure price stabilisation for certain crops that are out of the purview of MSP. However, this could also impact inflation and hence this will be a cautious move by the government.
Promotion of organic farming could also be an area that the government may intend to drive, thus giving scope for better earnings to farmers.
To address the price volatility of perishable goods, we could expect increased efforts on creating a secondary processing infrastructure.
Minimising risk of extreme weather conditions
With natural calamities or poor monsoons contributing towards low crop yield, budget allocation has been made to ensure proper assistance to all the affected farmers. This is ensured in several ways by part loan waivers, small concessions, interest subvention or repayment incentives to farmers.
Various subsidy programmes and insurance schemes may continue to be a major focus for protecting the farming community. There are plans for the government to invest in crop insurance and introducing technology for easier access to losses and a faster claim settlement.
Climate Resilient Agriculture could be an area of interest that the government might focus on to reduce the risk owing to climatic changes.
Supporting farmers with credit assistance
The reforms announced in the interim budget such as the ’Pradhan Mantri Kisan Samman Nidhi’, Pradhan Mantri Shram-Yogi Maandhan and the Kisan Credit Card scheme, will provide financial support to farmers by either providing additional income or financing arrangements. This is likely to drive consumption-led growth for the rural economy.
Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), the interim budget included a Direct Income Support scheme, where Rs 6000 was proposed to be transferred to small and marginal farmers annually. This will continue to be a welcome move, thus enabling farmers to benefit from this marginally. However, the quantum and coverage of this proposal could be suggested and analysed further during the upcoming budget.
One could expect the budget to focus on ways to increase availability of institutional credit to farmers to help them meet input costs and other operating expenses
The government may continue to focus on expanding the reach of Pradhan Mantri Fasal Bima Yojana scheme. This scheme essentially covers insurance and offers financial support to farmers in case of any crop failure as a result of calamities, pests or plant diseases. This scheme also helps farmers adopt innovative agricultural practices and ensures flow of credit to the agro sector. It is expected to expand the reach of the scheme to all the farmers and educate them to report and make claims under the scheme, so that they are benefitted from the scheme.
Lastly, we could also expect to see investments in agri-tech start-ups or agri-based innovation labs and significant focus on developing cold chain infrastructure and agri-exports by the government. In summary, we sense a budget focusing primarily on farmers overall welfare and development as agriculture continues to remain a key growth driver for the economy.
Harsha Razdan is Partner and Head – Consumer Markets at KPMG India.
First Published: IST