Budget 2017: Renewed focus on agriculture

Govt will focus on agriculture, with a 24% increase in agri, rural and allied sector allocation

The most important part of any Budget is to keep revenues and expenditures somewhat in sync. And Budget 2017 does that quite well. Of course, there is much that I would have liked to see but did not, from simplification of the tax code to public sector reform to improved protection of life, property and freedoms.

However, there is also a clear direction which deserves comment — the government will focus on agriculture, with a 24 per cent increase in agri, rural and allied sector allocations. No one can fault the intention, but what is the mechanism? If the government were serious about this, it would not merely allocate, but also have a well-thought-out strategy for doing so. And here the finance minister’s speech reveals much more than the numbers.

Consider credit first. The FM “targets” credit to farmers at Rs 10 lakh crore. When the FM announces a target, rather than a simple allocation, banks willy-nilly push credit to sometimes even bad investments. That does not help productivity and sometimes even worsens market failures. Farmer indebtedness hurts everyone, and is known to cause four-fifths of farmer suicides, or thereabouts. But the allocation towards “computerisation and integration of all 63,000 functional PACS with the core banking system” is a very good move, as it helps in more efficient allocations. So is the expansion of the crop insurance or Fasal Bima Yojana, which is seeing massive increase in allocations year-on-year for the third year. But I would also like to see serious studies in parallel on weaknesses and potential improvements.

On the inputs side, greater allocations towards soil health cards are great and so is the increased emphasis on long-term and micro-irrigation, and also minor ponds through a better endowed NAREGA. In the past, this type of initiatives failed because of the lack of monitoring and corrections in such initiatives, which unfortunately the FM was silent about.

On the marketing side, the government wants to improve better price and trade information through a nationwide e-marketplace, which would information-ally integrate the mandis through a National Agriculture Marketplace (e-NAM). He also called for relaxing some of the elements of the APMC Act so that perishables, fruit and vegetables can be sold direct by farmers. This will improve both incomes and price discovery.

Overall, this is a good set of objectives. However, I would also like to have seen a renewed focus on extension services, which are in a shambles across India. With rapidly changing farming technologies and climate change, agriculture extension services can play a very important role in doubling farmer incomes. Perhaps it will be an off-Budget outcome. Other items include improved seeds, less harmful pesticides, input quality monitoring, drainage etc.

So there are two classes of gaps – the first is quality of implementation and the second is market failures in subsidiary inputs. One problem is that too many laws, sometimes draconian, prevent sane private sector players from entering these areas. And second, the government has limited capabilities and cannot be expected to help shore up all agriculture-related activities.

Therefore, it is time that the FM and PM start thinking of delegating such items of governance and empowering PRIs. Both as local service providers and as monitoring agencies, they can become much better mechanisms for increasing agriculture incomes, than babus in their towel-backed chairs in district headquarters or capital cities. But that may take a few years. In the interim, rather than blindly depending on public sector and government machinery, the government would do well to allocate funds for a special monitoring and improvement function either within or outside the government that ensures that such initiatives improve as they go along.  

The writer is director of Indicus Foundation