Agriculture squeezed out in Budget 2010

Agriculture squeezed out in Budget 2010

Finance Minister Pranab Mukherjee has left the onerous task of increasing agricultural production to the monsoons.

Like all his predecessors, beginning with Manmohan Singh as finance minister in 1991, Mukherjee has also eulogised the farmer and stressed on the need to strengthen farming, but has failed to provide a definite roadmap to boost food production. Nor has he given any fiscal incentive significant enough to the beleaguered farming community to bail them out of the prevailing economic hardship. 

I wasn’t expecting much from Budget 2010 as far as agriculture is concerned, but considering the phenomenal food inflation and economic distress farmers faced from the extensive drought conditions in kharif 2009, the finance minister could have been a little more generous to announce a slew of stimulus incentives/measures to prop up the sagging farm morale.

I am aware that he has little scope for financial manoeuvrability given the tight fiscal package at his disposal, but there could have been a more drastic cut in the stimulus package that was given to the industry, and these benefits could have been easily passed onto farmers through a bonus on wheat, rice and coarse cereals.

Four-point strategy

Coming back to the big ticket that the country was waiting for, Mukherjee has very cleverly announced a four-point strategy to revitalise agriculture which is good on intent, but weak in content. I had expected the UPA government to really focus on rejuvenating agriculture and thereby giving strong signals for taking the farm sector to achieve a growth rate of 4 per cent. At present, agricultural growth rate is minus 0.2 per cent, certainly a drag on the economy.

Except for enhancing the credit package to farmers by an additional Rs 50,000 crore (taking the total credit to Rs 3.75 lakh crore), and providing an interest subsidy of 2 per cent  on timely repayment of crop loans, the four-point strategy that he announced is more a token than anything meaningful. Proving Rs 300 crore for reviving oilseeds and pulses production in 60,000 villages in the dryland regions is also a misplaced strategy.

The shortfall in oilseeds production is not due to the inability of the farmers to increase productivity, but because of the government’s deliberate efforts to reduce import tariffs on edible oils as a result of which cheaper imports have flooded the domestic market. In 1993-94, India was almost self-sufficient in edible oils, but the continuous reduction in import tariffs over the years has turned the country into world’s second biggest importer.
India can bind import tariff for oilseeds at 300 per cent under the WTO, but has brought it down to zero. Similarly for pulses, the import duty is zero. Unless the tariffs are restored, there is no way Indian farmer can compete with cheaper subsidised imports.

Taking the green revolution to the north-eastern states, for which he has provided an allocation of Rs 400 crore, is also a flawed strategy. Why I am saying this is because it is the green revolution technology that has destroyed soil fertility in Punjab, Haryana, Western Uttar Pradesh and Andhra Pradesh. It is because of the devastation that green revolution has caused to the natural resource base that farmers have taken to suicides. To take the green revolution model to the northeast therefore means that the country hasn’t learnt any lessons from the debacle.

Pragmatic approach

Budget 2010 does have some inkling of pragmatic approach. Mukherjee has done the right thing by not enhancing the allocation under NREGA. In 2009, he made a budgetary provision of Rs 39,100 crore, and this year kept it at Rs 40,100 crore. This is a wise decision considering that NREGA is a new scheme, and has a lot of problems with implementation. Making more allocation gives room for more leakage and corruption.

At the same time, I am delighted to find that the finance minister has extended the health insurance cover (that was initiated last year to BPL families) to also NREGA workers who have put in a minimum of 15 days of labour. In the years to come, there is a desperate need to extend health insurance cover to the entire farming class also, which has still not been given crop insurance. The food policy initiatives that are spelled out in the Economic Survey indicate more thrust on food retail and industrialisation of agriculture, which means more will be the burden on the farmers from external inputs.

This is a misplaced emphasis, and comes from a class of economists who are not in tune with the ground realities. Already, the wish-list spelled out in the Economic surveys of past 3 to 4 years has pushed agriculture to an unmanageable crisis. It is high time that a sincere effort is made to reverse the disturbing trend, and bring back the smile on the face of the farmer. This can be done, provided the political leadership demonstrates willingness.

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