However, though the flow of subsidised institutional credit to the farm sector is proposed to be raised to Rs 9 lakh crore in 2016-17, no attempt has been made to target it more precisely. The finance minister could not be unaware of the observations made by the Reserve Bank of India's committee on financial inclusion in its recent report that agricultural production was not commensurate with the volume of credit being inducted into this sector. A sizable part of the money, obviously, doesn't reach where it should. More significantly, the committee pointed out that most funds were doled out as short-term crop loans, leaving largely unmet the need for long-term investment in productivity-boosting measures. Such flaws need to be corrected to make agricultural credit more productive.
Moreover, the Budget has left largely unattended the long-overdue fertiliser subsidy reforms, although a pilot programme is to be run on direct subsidy payment to farmers. The more urgent need to reduce urea subsidy by decontrolling it and bringing it under the nutrient-based subsidy regime has been overlooked. Also disregarded is the need to substantially increase the funding for technology generation and its transfer to farmers to reduce their production costs and increase crop productivity. Another critical aspect that required revamping is the system of providing remunerative prices for farm produce. As pointed out in the paper brought out by the NITI Aayog's task force on agriculture, the present minimum support price (MSP)-based mechanism has failed to benefit the producer of most crops other than wheat and rice. It has suggested replacing this system with a novel "price deficiency payment mechanism" to ensure reasonable returns to all farmers and for all major crops. This system merits a fair trial.