Budget 2020 heralds welcome policies for rural economy but devil is in the details and implementation

Budget makes a big bet on agricultural logistics including warehousing, storage and even a Kisan Rail and Krishi Udan to ferry perishable goods

The Union Budget 2020 comes at a time when there is a sense of almost total despondency among different sections. Apart from the usual lofty statements of intent about doubling farmers’ incomes by 2022, unlike the previous budgets, this one seems to have started applying its mind as to the programmes needed to improve incomes and increasing investments in agricultural infrastructure, if not double incomes. The sixteen points of focus invariably cover many facets of the agricultural value chain.

Increased government investments

Among the many announcements in agriculture and rural areas, the more interesting and welcome promises in the Budget include support to states that implement three central model laws on agriculture related to land leasing, marketing and contract farming, changes in tax structure for cooperatives, extending the coverage of kisan credit cards, investments in internet connectivity for panchayats, rural logistics, Jal Jeevan Mission, Kisan Rail and income generation from barren land.

There is a refreshing focus on agriculture and allied activities, which have an allotment of Rs.2.83 lakh crore. Invariably, the impact of these can be gauged only when the details of the policy are analysed in their totality rather than the headlines in the Budget speech. Investments in reducing water stress are a good beginning, especially in the context of massive groundwater withdrawals and growing water stress.

Need for caution

The Budget speech also highlighted some of the issues that should ideally make the government cautious when expanding the scope of direct benefits transfer since FM cites data that only half of the farmers have accessed priority sector lending loans. Further, less than half of the owners with operational holdings have access to the Kisan Credit Card scheme. This raises important questions about the nature of land holding, property laws and the importance of tenant farmers in rural areas. Unless concepts such as ‘adverse possession’ are repealed through the statute, it is unlikely that landowners inheriting their holding would ever want to sign a formal lease deed with a landless tenant farmer – especially not in the era of rising land values and increasing indebtedness.

The Budget makes a big bet on agricultural logistics including warehousing, storage and even a Kisan Rail/Krishi Udan to ferry perishable goods. Effective implementation will lead to a positive spin off. However, the impact may be difficult to gauge when it is likely that most of these measures are to be through the Public-Private Partnership (PPP) routes. The government’s role itself may largely be restricted to providing viability gap funding.

A real problem when dealing with rural areas is the lack of skilled human resources required across widely dispersed areas. The use of Self Help Groups (SHGs) related storage units at the village level is one that needs to be approached with caution because as a generalisation, members of the SHGs tend to be from the lower end of skill value chain in rural areas. Hence, giving them important functions like seed storage areas when there is a lack of required skills may end up creating more problems since any loss due to human errors of the low skilled SHGs will aggravate existing social frictions in rural areas.

Is there a real departure?

It is too early to gauge if the Budget will lead to a policy paradigm shift in the rural economy. Invariably, as with most of the other well-intentioned measures, implementation is the Achilles heel of the government and the fine print in government policy invariably aggravates the proverbial slip between the cup and the lip. A clear unknown is that the Budget may still be depending, albeit with modifications, on the old, post-1991 reform paradigm that problems in agriculture can be dealt with through credit availability. The increase in priority sector lending target from about Rs 10 lakh crore to Rs 15 lakh crore is either indicative of this trend or portends a huge push for increased private sector participation in agricultural infrastructure. Reduced subsidies and lack of remunerative prices has drastically reduced margins for farmers. It remains to be seen if private sector participation will help improve those margins even while an increase in costs is a foregone conclusion with the self financing nature of operations of PPP projects. If there is one thing that is clearly lacking in the Budget, it is much needed public investments in agricultural extension activities.

(S Ananth is an independent researcher based in Vijayawada, Andhra Pradesh)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.