Agri budget likely

Behind the show of elation over the win in Gujarat and Himachal Pradesh, the BJP would surely be worried about erosion of rural support. In Gujarat, the petering out of returns from cotton farming, along with the urban economy losing the capacity to provide jobs, has played a role in the prevailing rural disenchantment. The BJP leadership would be apprehensive of rural issues blowing over in the 2018 Assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarh in particular — BJP-ruled States that saw farmers’ protests earlier this year. Unlike in Gujarat, these States lack a robust urban economy to absorb fluctuations in rural fortunes. As in the current election campaign, the economy is likely to influence the discourse in the eight States that will go to polls in 2018, including Karnataka, Nagaland, Tripura, Meghalaya and Mizoram. A pro-rural Budget is, therefore, on the cards next year — particularly in view of the Centre’s earlier promises to ‘double farmers’ income by 2022’ and ‘provide MSP at input cost plus 50 per cent’, which raised farmers’ expectations and played a role in the BJP’s win in 2014. The Budget will seek to address an impression of unfulfilled promises on both the rural incomes and jobs front, as the ruling party gears up for the 2019 Lok Sabha elections.

A tight situation such as this provides the Centre an opportunity to take corrective steps, as against populist fixes, in terms of budgetary allocations. Hence, while an increase in the 2017-18 agriculture outlay of ₹41,855 crore may help in addressing farm distress, it is also important that the money is not entirely used up in relief and crisis alleviation measures, such as crop insurance (₹9,000 crore in 2017-18) or interest subvention (₹15,000 crore). The Rashtriya Krishi Vikas Yojana, conceived as a joint scheme of the Centre and the States to enable the latter to step up public investment in agriculture, could do with a fillip. The ₹4,750 crore outlay for 2017-18 should be spent in the remaining months of this fiscal and the outlay increased in the next year in coordination with the States which have been called upon to spend a third of the RKVY budget for infrastructure. A higher outlay on R&D for sustainable farming will have a lasting impact. Price deficiency support, along with crop insurance, is a useful supportive step, but reports from Madhya Pradesh suggest that it is working more to the advantage of traders than farmers. A focus on providing an assured income to farmers, as against short-term fixes would be welcomed.

Rather than make demands for dividends from the public sector to bridge the fiscal gap, a step up in investment will lift growth and jobs. The Centre may well claim that its recent wins affirm the ‘Gujarat model of development’, but the truth is more complex. Inclusive policies that lift all boats without being thoughtlessly populist are the way forward.

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