Union Budget 2022: Agriculture, rural could do with more stimulus

The agriculture sector has done well during the pandemic with growth rates of 3.6 per cent and 3.9 per cent, respectively, in 2020-21 (FY21) and 2021-22 (FY22).

However, agricultural and rural incomes are under stress due to several reasons. Farmers have to pay more for farm inputs and non-agriculture consumption, including health, as terms of trade are not in favour of agriculture. Reduction in remittances due to reverse migration and lower growth in rural wages led to low incomes in agriculture and rural areas. According to the Situation Assessment Survey of the National Sample Survey Organization, an average farmer is getting only Rs 127 per day from cultivation and Rs 341 per day from all sources (cultivation, wages, animals, and non-farm business). Micro, small, and medium enterprise (MSME) and informal sector workers have suffered a lot with loss in income and employment during the pandemic. In other words, we still have K-shaped recovery and high inequality. The rural demand for the fast-moving consumer goods sector, consumer durables, and two-wheelers has been low. Therefore, one expected more stimulus for the farm sector and rural areas in the Budget to improve growth and jobs.

Boost to infrastructure is the defining feature of this Budget and wants to have the vision of Amrit Kaal of the next 25 years. Capital expenditure increased sharply by 35.4 per cent, from Rs 5.54 trillion in the current year to Rs 7.5 trillion in 2022-23 (FY23). This will help rural areas also.

Food, fertiliser, petroleum subsidies were lower in FY23, compared with FY22. Some of the announcements for agriculture in this Budget are: (a) promoting chemical-free natural farming, (b) promoting post-harvesting value addition, consumption and branding of millets, (c) scheme to increase domestic production of oilseeds, (d) delivery of digital and high-tech services to farmers in public–private partnership mode, (d) use of kisan drones to aid farmers, (e) launching fund with blended capital to finance agriculture start-ups facilitated by National Bank for Agriculture and Rural Development, and (f) comprehensive package for food processing with participation of states.

Some of these measures are in the right direction, but more push is needed to improve the income of farmers. There is marginal increase in the allocation for agriculture and allied activities, from Rs 1.48 trillion in FY21 to Rs 1.51 trillion in FY23 — an increase of 2.2 per cent. On agriculture research and development, the allocation is only Rs 8,500 crore — the same as last year. This is only 0.4 per cent of agriculture gross value-added, while other countries have 1-2 per cent of gross domestic product (GDP).

The Budget has not increased allocation for rural development and some important schemes. The expenditure for total rural development is stagnant at Rs 2.06 trillion in FY22 and FY23. There is a demand for Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). However, the allocation to MGNREGA declined from Rs 98,000 crore in FY22 to Rs 73,000 crore in FY23. The continuation of the Emergency Credit Line Guarantee Scheme for MSMEs is in the right direction.

Credit guarantee trust may help the micro sector, but much more is required. There are some schemes for education and health. But the government has to address rise in quality and reduction in digital divide in rural areas.

The Budget could have focused on direct push to agriculture and rural infrastructure development, increase in allocation for rural schemes and direct cash transfers to revive consumption. The Rs 1-trillion agricultural infrastructure fund should be incentivised to utilise on fast track.

Similarly, investment in R&D in agriculture has to be raised as returns are much higher than other investments. Exports have to be pushed aggressively.

Around 51 per cent of MSMEs are in rural areas and many of them have to be revived. India can’t become Atmanirbhar without dynamic MSMEs. Rise in incomes of agriculture and rural population can increase consumption and GDP. 

The author is Director and Vice Chancellor, IGIDR, Mumbai