The Union Budget presented on February 1, 2020 by the Finance Minister has left the farmers and experts divided on the proposals announced for agriculture sector. A 16-point mega action plan for reviving the troubled farm sector has been proposed in the Budget.

The proposals range from expansion of PM-KUSUM to 20 lakh farmers, setting up of grid-connected solar farms on barren lands making the annadata an urjadata , introduction of the Kisan Rail and the Krishi Udaan to speed up transport of perishable produce, a cluster approach to develop horticulture under the ‘one product one district’ scheme, to a village storage scheme to link warehouses with e-trading and the e-National Agricultural Market (e-NAM) platforms.

These proposals are definitely laudable; however, will they be able to double the farm income by 2022?

More than farm credit

The routine highlight of every finance minister’s budget is the increase in the agricultural credit for farmers, and this Budget is no exception. A 11 per cent increase in the agricultural credit to ₹15 lakh crore for 2020-21 may be presumed to bring about a ray of hope. But, such allocations have hardly made any changes on the ground, as the farmers have very limited access to institutional credit. The woes of the farmers, instead of receding, get multiplied with malicious moneylenders ruling the roost.

As for the farmer, enhanced credit flow and access to ATMs through Kisan Credit Cards will have a big impact only when the main issue of rising costs of farm inputs and lower price for his produce is addressed.

Impact of schemes

While the Budget talks a lot about strategies to boost farm income, it is fails to foresee the repercussions, which are most likely to result due to cuts in budgetary allocations to certain crucial schemes. The Budget announced a slash in the funds to the FCI and procurement operations from ₹1,84,220 crore to ₹1,08,688 crore. Such an unprecedented cut of ₹75,000 crore is bound to hurt procurement operations and would leave the farmers at the mercy of private traders. The cut would have been understandable had market prices been at par with MSPs. But, the market prices have been ruling consistently lower than MSPs for most crops.

It was expected that the government would increase the allocation towards the MGNREGS. But, the allocation to the MGNREGS for 2020-21 stands at ₹61,500 crore, which is lower than the current year. Although such a move will not affect the growth of the farm sector, some critics believe that due to the rural distress, it will have further dampening effect on rural employment and income generation. Nevertheless, the Budget could have proposed the long-standing demand of the farmers to link the MGNREGS with agricultural activities to overcome the shortage of farm labour in agriculture. However, the government has decided to restrict its implementation to fodder farms alone.

Land-owning farmers stand to benefit from the Budget as PM-Kisan gets an allocation of ₹75,000 crore in 2020-21, as against the ₹54,370 crore to be spent in 2019-20. The Budget could have also proposed to include tenant farmers and landless agricultural labourers, who form the most vulnerable section of the agricultural community, in the scheme.

Fundamental constraints

The government’s intent to double milk processing capacity from 53.5 million metric tonnes (MT) to 108 MT by 2025 is definitely a noteworthy proposal. But, how will this help increase the income of farmers? There is a need to address the issue of rising health expenses of cattle as well as cost of cattle feed.

What the country needs is an increase in demand and purchasing power in rural areas. The Budget should have provided more money into the hands of farmers, as that has an almost three-fold multiplier effect on the economy, which would create more rural demand and in turn would lead to more consumption, driving the GDP up.

There is absolutely no doubt that in the years to come, the proposals announced in the Budget will definitely fill a big gap in helping farmers realise better prices. However, the policymakers must understand that unless farmers get better remuneration from crops and the gap between the ever-increasing cost of farm inputs and the lower price for produce is bridged, any effort to double farm income will always remain elusive.

Narayanamoorthy is former Member (Official), CACP, and Alli is Senior Assistant Professor, Vellore Institute of Technology, respectively. Views are personal.

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