The Union Budget 2020-21 is under a heavy spotlight. Besides finding additional revenue sources to meet the ever-growing demand for governmental financial assistance, it is looked at as a major policy instrument to steer the economy away from the sub-5 per cent GDP growth.

A fair amount of fiscal and monetary concessions have already been extended in the last five months to businesses in manufacturing and trade. As is rightly believed, the effectiveness of these initiatives will not be immediate and consumption levels will have to rise, as aggregate demand in the economy builds up. To aid this, the huge rural population’s ability to buy more must be boosted.

Fortunately, doing so could be relatively quick, affordable and effective. To start, the capital-output ratios of agriculture and allied activities are lower than other options available, a high number of additional jobs are created, and the gestation period for achieving higher income and employment is months, rather than years. Furthermore, the machinery required to pump more liquidity into such activities is already in place. Agricultural promotion activities have been undertaken by States for decades, and additional provisioning should not unduly stretch the implementation infrastructure in place.

Increase spends

Ideally, the Union government should double the current year’s budgetary spends for each of its schemes in the rural and agriculture sectors; perhaps, a 50 per cent increase now, and a postponed doubling the following year is a more realistic target. This may appear excessive, but it increases the provisions only by about ₹1 lakh crore — or 3 per cent of the budget.

To that extent, this should be affordable, especially when there is considerable scope to reduce the expenditure on fertiliser subsidy by routing it to farmers through direct benefit transfer rather than giving it to manufacturers, and by reducing the rate of subsidy on nitrogenous fertlisers viz. urea. Rationalising the outdated minimum support price scheme for cereals such as wheat and paddy would also save funds.

Higher and more focussed agri spends are preferable, as these boost aggregate demand for goods and services by almost the same amount.

Increased rural spend has other favourable forward and backward linkages, including higher tax-collections from manufacturers and service providers. With lower direct tax rates already available, and a more streamlined GST regime expected, bumping consumption could start the much-needed cycle of investment and capacity-building.

Several changes are recommended. The allocations for the PM-Kisan and PM-Kisan Maan Dhan Yojana (PM-KMY) certainly call for augmentation. Under the former, only eight crore of 14.5 crore eligible farmers have received the two four-monthly instalments of ₹2,000 each. Given the reality of most farmers currently reeling under the effects of two years of drought, unseasonal rains and floods, the yearly grant should be raised to ₹9,000, in two instalments.

The initiative should also be extended to tenant-farmers. A budgetary increase from ₹60,000 crore to ₹90,000 crore might suffice, given the current year’s actual expenditure would be under ₹50,000 crore. The PM-KMY pension scheme needs to be extended to small farmers and landless workers above age of 60, as opposed to only young farmers eligible now. In a similar vein, allocation for the crop insurance subsidy scheme the (PMFBY) be increased from ₹14,000 crore to ₹18,000 crore as severe floods have caused increased crop losses and insurance claims.

State initiatives

To increase food exports, public investment in agri-infrastructure with higher allocations and subsidies in irrigation, seeds cold storage, warehouses, logistic parks for perishables and rail-wagons is warranted. Materialising these through the PPP system can be done relatively quickly in co-operation with State governments.

Involving farmer co-operatives and private local groups in completing the distribution channels from main canals of medium and large irrigation projects would vastly help lift their dismally low irrigation efficiency. Central funding, with States taking on more initiative, should be the approach for setting up decentralised and small agri-projects.

Such enhanced allocations for agriculture would still allow for supplementation by about ₹55,000 crore of the suggested additional ₹1 lakh crore for ramping up existing rural schemes. Despite the known shortfalls, the MNREGA is worth expanding to meet the swelling demand for unskilled work from rural youth and women. Minimum-wage schedules prevalent in the States also have to be adhered in it, with the ceiling enhanced to 150 days of work from 100.

Moreover, the broadly successful PM Gramin Sadak Yojana for village to market-place connectivity and the Gramin Awas Yojana for affordable housing, useful as both are, must be better funded by 50 per cent more and issues connected with their quality better addressed.

The writer is a former Secretary to the Government of India

comment COMMENT NOW