Unpacking the budget for the agricultural sector – Vidya Vemireddy, Ram Mudholkar

India’s recently announced budget seeks to focus on accelerating growth in an inclusive manner, benefiting all sections of society. It sets out a comprehensive framework for advancing India’s progress on all fronts over the next 25 years, referred to as the ‘Amrit Kaal’ of the next 25 years – from India at 75 to India at 100. For agriculture, there was an annual increase of 4.5%. over 2021-22 (revised estimates) [figure1] and restructuring of budget headings by consolidating schemes [table 1].

Agriculture has been a key priority area for policy in India with the action plan to double farmers’ income by 2022. Despite the challenges of the pandemic, agriculture has been a resilient sector accounting for 18, 8% (2021-22) in gross value. Added (GVA) of the country registering a growth of 3.9% in 2021-22[1]. To achieve the policy objectives, the Union Government has significantly increased expenditure on agriculture and related sectors from Rs. 46,361 crore in 2017-18 to Rs. 135,854 crore in 2021-22 [Figure1].

Source: expenditure budget, Union budgets (2014-22)

Main lessons for the agricultural sector from the 2022-23 budget
a. Crop diversification

The budget emphasized improving oilseed productivity and total production to reduce dependence on imports (INR 600 crore). In addition, within the framework of the International Year of Millet 2022-23, the budget provided for post-harvest value addition, the improvement of domestic consumption and the branding of millet products at the national and international levels.

b. Supply-side constraints: technology development and service delivery
The cornerstone of the budget is a focus on growth through significant expansion and capital expenditure, with a 35.4% increase in Indian government budget spending to boost efficiency on the side of the supply and significant expenditure for infrastructure development; which, in turn, can affect agriculture. While a number of measures have already been employed to strengthen supply-side constraints, boosting start-ups with the aim of “funding start-ups for agriculture and rural enterprise, relevant to the chain value of agricultural products”. The activities of these startups will include, among others, machinery for farmers on a farm-level rental basis, and technologies including IT support for FPOs (agricultural producer organizations). It can help bridge that gap by enabling technology and innovation. Providing digital and high-tech services to farmers in a PPP model can prove effective in providing the necessary technical know-how to farmers. The use of Kisan drones for crop assessment, digitization of land records, spraying of insecticides and nutrients.

vs. Natural agriculture, added value of modern agriculture
The budget also emphasized natural agriculture devoid of any chemical use. The Finance Minister said: “Natural agriculture without chemicals will be promoted nationwide, with emphasis on farmers’ land in 5 km wide corridors along the Ganges, initially” . In addition, states will be encouraged to revise agricultural university curricula to meet the needs of natural, zero-budget, and organic agriculture, modern agriculture, value addition, and management.

(L to R) Vidya Vemireddy and Ram MudholkarLikely impacts and implications
Supply-side constraints are severely limiting the take-off of agricultural growth in India. This budget addresses some of them by strengthening provisions for improving technology, entrepreneurship, and infrastructure, but the lack of detail on capital expenditures for agriculture limits analysis. magnitude of the training effects. The innovation push is a welcome move given the booming start-up sector and would help realize the sector’s potential. The focus on related sectors which are the main drivers is also necessary. Technology adoption and capacity building remains a major challenge for farmers in India. Several studies point to the potential and need for improving extension services to improve technology adoption, increase agricultural productivity and reduce yield gaps. For the high-tech sector, the PPP model may prove effective, however, a lesser push for the large extension network in India may prove to be a missed opportunity. Budget allocation for extension is slightly increased by 8% to INR 1000 crore [table 1] which is insufficient for the objective of capacity building envisaged at farm level. Further improvement in these directions can prove to be very effective.

The budget envisions inclusive growth, but most focus areas are more focused on medium-to-large farmers. While exports have increased in recent years, the bane of agriculture has been the lack of global marketing. The budget should have highlighted this aspect and should have highlighted measures to continue to strengthen FPOs as a key means to address marketing challenges. Inclusive growth in the next 25 years must recognize the growing needs of women in agriculture; who form a significant part of the agricultural labor base.

Agricultural research is the key to technological progress. However, the budget allocation remained the same as the 2020-2021 levels at INR 8513 crore. Under such a vision, agricultural research needs a complete overhaul and requires significant research investment, both public and private. The budget should have highlighted this aspect and made provision for directional support as a priority. In addition to investments in research, it is prudent to strike a balance between long-term central schemes, centrally sponsored schemes and short-term cash schemes such as PM-Kisan. The GoI has restructured programs aimed at comprehensive budgeting, however, keeping a long-term perspective in designing budget frameworks may prove more beneficial for the achievement of policy objectives. At the time of the next 25YR – ‘Amrit Kaal’, a clear results-oriented vision is needed for the agricultural sector, with emphasis on agricultural research and education, expanding global market presence through exports and the infrastructure support system.

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Lana T. Arthur