Budget 2021 | 'Govt will reiterate commitment to MSP'

Budget 2021 | Govt expected to reiterate commitment to continue MSP, says economist

Credit: Reuters Photo

By Arun Singh

Agriculture has been one of the few sectors which have remained a bright spot during the pandemic and will continue to grow positively backed by government support. The upcoming Union Budget is expected to focus on introducing measures that will provide further impetus to the sector. To revive the overall demand in the economy, the government will have to place considerable thrust to uplift the demand in the rural economy. Against this backdrop, some key expectations from the budget are

1. Reiterate the commitment to continue MSP - In view of the ongoing farmers' protests, the government will reiterate its commitment to continue the MSP system in the Budget. It would also seek to increase the scope of the current form of MSP by guaranteeing some specified quantity for procurement under MSP.
Developing agriculture infrastructure – Need to expediate the spending of Rs 1 trillion announced for strengthening agriculture infrastructure like cold storage, supply chain and warehouses under Atmanirbhar Bharat.

2. Crop insurance scheme – The government should try to revamp the Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme and relook at the structural, logistical and other obstacles, and try to reverse the trend of farmers and states leaving the scheme. We expect some announcements with respect to the crop insurance scheme in the budget. The government has made the PMFBY scheme voluntary for farmers. This needs to be withdrawn as it will reduce the crop insurance cover further.

3. Comfort to small and marginal farmers - The Pradhan Mantri Kisan Samman Nidhi Yojana(PM-Kisan) is a minimum income support scheme under which Rs 6,000 per year are provided to all small and marginal farmers in three equal instalments. The Budget is expected to increase the income support from Rs 6,000 toa higher amount.

4. Cash subsidy to farmers - The Budget is also expected to propose a plan for roll out of direct benefit transfer to farmers for subsidies related to fertiliser or electricity.

5. The impetus to food processing industry - The Budget is also expected to propose extending incentives like funding assistance to all food processing companies as against only to those in Mega Food Parks.

6. Increased allocation for rural employment generation - With migrant workers returning back to their home states during the pandemic, the demand for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has increased substantially. In FY21, 99 mn workers worked under MGNREGS as compared to 78.9 mn workers in FY20. Given that the demand for MGNREGS continues to remain elevated, the Budget is expected to propose increased allocation for the scheme.

7. Placing thrust on Rurbanisation – It becomes imperative at this juncture to place a strategic focus the Rurban Mission to bridge the rural-urban divide, address the rural to urban migration, develop skills and local entrepreneurship in rural areas along with improving infrastructure and service provision. The Budget is expected to announce measures focusing on these core areas which will help to revive rural demand.

8. One village one competitive product’ (OVOP) should be designed and promoted – The Budget is expected to enhance the scope of OVOP to include artisan products and encourage states to take-up more measures to promote OVOP.

(The author is Global Chief  Economist at Dun and Bradstreet.)