The first two years of Modi government led to a collapse of agri-GDP growth to 0.5%, but third year (FY17) is likely to register a growth of 4.1%, primarily due to normal rainfall. This, along with falling global prices, brought down food inflation to below 4%, giving much needed relief to consumers. The lesson government learnt is that it needs to focus on providing irrigation to our farmers. Prime minister gave a slogan of ‘har khet ko pani’ and ‘per drop, more crop’ to drought-proof agriculture and to ensure water use efficiency. This will also help in augmenting farmers’ incomes and contribute to doubling of their incomes in five years, as reiterated by the finance minister.
Accordingly, Budget FY18 has given priority to raising funds for irrigation. An enhanced corpus of R20,000 crore with Nabard for irrigation, on top of last year’s R20,000 crore, is a very welcome step. Nabard is confident to raise roughly R15,000 crore by March-end 2017, and has already sanctioned projects worth about R36,000 crore for which, now, funds need to be raised from the market. Add to it the corpus of R5,000 crore for micro-irrigation with Nabard, plus R7,377 crore for the schemes under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), one can clearly see that government seems willing to walk the talk on irrigation promises. But one needs transparent monitoring to ensure that these resources don’t disappear as water disappears in sand.
Crop insurance scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY), which was launched last year also finds a special mention in the budget with the FM clearly charting out its course—in the next two years they will cover half of the cropped area under this scheme. The experience of kharif 2016, shows a dramatic improvement in coverage. The Budget provides R9,000 crore for subsidising the premium of farmers, but our calculations show that it may fall short by about 25 to 33%, and it may have to be raised in the revised budget estimates. However, the litmus test of the success of this scheme needs to be judged by how fast farmers can be compensated when their crops are damaged due to drought or floods. In this regard, the 2016 kharif floods in Uttar Pradesh, Bihar and Assam, do not give much satisfaction. The government needs a champion within the system to ensure that this scheme wins full confidence of farmers, which is still missing.
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A corpus of R8,000 crore (R2,000 crore to start within this year) with Nabard for promoting milk processing, too, is a great idea. One hopes that Nabard will help cooperatives and private sector on equal terms to set up about 20 milk processing plants of 10 lakh litres processing capacity each day (each plant will cost about R100 crore), especially in central and eastern India, which can give a big fillip to dairy activities, augmenting farmers’ incomes.
Other initiatives like eNAM for linking markets, PMGSY for roads, etc, are all in the right direction and would support farmers in a healthy way.
The only disappointment in the budget is that government is totally silent on reforming food and fertiliser subsidies totalling more than R2,15,000 crore plus their pending bills of about R80,000 crore. This is the biggest resource guzzler with high inefficiency and leakages. Unless they are reformed boldly, agriculture will not get wings to fully take off.