This is the last full Budget of Union Finance minister P Chidambaram before his party goes to elections next year. He has tried to please all sections of the society ? farmers, industrialists, SCs, STs, OBCs, minorities, women, children, income tax payers, etc. There were a lot of expectations that the Budget would focus on agriculture and rural areas. Growth rate of agriculture declined from 3.8% last year to 2.6% this year. Farmer suicides are still continuing. Increase in global food prices has also led to an increase in food inflation. The Economic Survey says that the ?acceleration of growth of this sector will not only push the overall GDP growth upwards, it would also make the growth more inclusive?.
The main announcement regarding agriculture relates to debt waiver scheme for farmers. For marginal farmers (i.e., holding up to 1 hectare) and small farmers (1-2 hectare), there will be a complete waiver of all loans and in respect of other farmers, there will be a one-time settlement (OTS) scheme for all loans. Government estimates that about three crore small and marginal farmers and about one crore other farmers will benefit from the scheme. The total value of overdue loans being waived is estimated at Rs 50,000 crore and the OTS relief on the overdue loans is estimated at Rs10,000 crore.
It is true that farmers needed some relief due to crisis in agriculture. But, it is not clear whether it is going to help farmers in the future and improve agriculture sector. Who is going to finance Rs 60,000 crore?
Is it the government or banks? If banks have to do it, they may not give loans in future because farmers may not repay. It may affect the banking sector. Also, as Rangarajan Commission on financial inclusion says only 27% of farmers are able to access to institutional credit. In other words, 73% of farmers who either take loans from moneylenders or do not take loans at all will not get any benefit.
On other proposals, agricultural credit is supposed to be Rs 2,80,000 crore in 2008-09. For Bharat Nirman, the Budget provides Rs 31,280 crore as against Rs 24,603 crore in 2007-08. Under accelerated irrigation benefit scheme, provision is made for Rs 20,000 crore in 2008-09 against Rs11,000 crore in 2007-08. Other proposals on agriculture include continuation of crop insurance, horticulture mission, irrigation and water resources finance corporation, and a provision of Rs 14,000 crore under the Rural Infrastructure Development Fund (RIDF).
Many of these proposals are routinely made in all the Budgets. Although every year the government says that agriculture credit is increasing, ground level realities are different. There are book adjustments and many small and marginal farmers are not getting credit.
Bharat Nirman is a good programme. More funds should have been allocated to this scheme. Some of the important things like the allocation to research and extension, price stabilisation fund, marketing, support to diversification, food processing etc. are missing. There is no mention about M S Swaminathan Commission report.
To conclude, it looks like the government concentrated on debt waiver scheme because of elections and gave only minor increases to other programmes. They should have given big push to agriculture by increasing public investment in infrastructure and research and extension and marketing. Another worry is about execution or implementation of the programmes announced in the Budget. Many things were announced in the last five budgets. We do not know the impact of these announcements on agriculture and rural development.
The writer is Director, Centre for Economic and Social Studies