Budget 2018: There are several other announcements on which more clarity is needed. The FM announced in the very beginning that MSP will be fixed at cost+50%. It’s still not clear if the government will consider C2 as cost.
Budget 2018: Even though the excitement on the Budget eve is predominantly an urban phenomenon through which our elite think the direction of economic policy can change, the rural and agriculture sector does not pin such high hopes on it. And the reason is not difficult to understand. Almost every year there is some enhancement in allocation for schemes affecting them, but the impact is hardly felt by most farmers. With growth in agriculture averaging just 1.9% in four years of Modi government, the FM had to do something to address rural discontent and loss of income of farmers since demonetisation. Another challenge before the government was to match heightened expectations due to its repeated announcement that farmers’ income will be doubled by 2022. In influential circles of policymakers, there is near consensus that the number of people dependent on agriculture has to go down substantially if it has to be made viable, but I did not find a road map in the Budget towards this long-term goal.
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There are at least five major announcements which can help the farmers and rural sector. Firstly, the launching of Operation Green may finally initiate a process of policy reforms in marketing of fruit and vegetables. In addition to attracting investments in supply chain, one hopes the government will also keep in abeyance its restrictive policies like the EC Act, stock limits, export bans, MEPs etc. Secondly, the FM did well to raise the budget of the ministry of food processing from Rs 800 crore (BE) this year to Rs 1,400 crore next year. Thirdly, launching of fisheries and animal husbandry fund of Rs 10,000 crore is a welcome announcement. I was also hoping for income tax exemption on income from dairying, but it didn’t happen. One also hopes that the government will realise that restrictions on trading of animals and violence targeted at meat traders ultimately hurts the farmers as it brings down the cost of animals sold by farmers. Fourthly, the announcement to extend crop loans to tenant farmers is a step in the right direction, but the modalities to implement it will have to be carefully worked out as states have different laws to record tenancy. Fifthly, the announcement to allocate Rs 2,600 crore to districts having less than 30% irrigated area is most welcome.
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There are several other announcements on which more clarity is needed. The FM announced in the very beginning that MSP will be fixed at cost+50%. It’s still not clear if the government will consider C2 as cost. If it’s C2, we should see an all-round rise in MSP and farmers would like to sell a higher share of their produce in market. Physical procurement of all commodities for which MSP is fixed is neither possible, nor desirable. Ironically, the BE for food subsidy to decentralised procurement states has been cut from Rs 38,000 crore to Rs 31,000 crore. So, one doesn’t get the feeling that MSP is going to be raised to 50% over C2 cost. The FM has also said if prices are lower than MSP, the government will ensure that they get the MSP. More than the budgetary allocations, it’s the implementation at state level which benefits the farmers.
Visiting Senior Fellow, ICRIER