Budget 2019: Developing non-farm sector crucial to provide additional income to farmers

Published: July 15, 2019 10:22:10 AM

India Budget 2019: Within the rural economy the state of the agricultural sector, which provides the largest share of employment in the country, can never be ignored.

Budget 2019-20: The overall capital expenditure of the central government and central public sector undertakings is lower than last year.Budget 2019-20: Sitharaman presented Union Budget on 5 July.

Union Budget 2019-20: In the recent budget the honourable Finance Minister emphasized the need to boost the rural sector of our country and a separate section in her budget speech was devoted to rural India. Within the rural economy the state of the agricultural sector, which provides the largest share of employment in the country, can never be ignored. In her maiden budget speech, Nirmala Sitharaman has recognised the contribution of our farmers in achieving self-sufficiency in pulses and hoped that a similar result will be achieved for oilseeds as well. In
her speech, she also emphasized the zero budget farming model.

In this context, it is to be noted that the Gross Value Added (GVA) for the agricultural sector at basic prices showed a growth (% increment) of 2.9 per cent during 2018-19, the lowest amongst all major sectors. Further, during the third quarter of 2018-19, it declined to 2.8% and subsequently displayed a negative growth of -0.1% during the fourth quarter. In particular, a Niti Aayog report, with estimates based on the NSSO’s 2011-12 consumption
expenditure data, shows that in states like Jharkhand, around 45% of farmer households are below the poverty line, while in Karnataka, the corresponding figure is 22.5% (which in fact equals the all India average). These are definitely issues to worry about in the face of large scale farmers’ distress in the country. In her budget speech, the finance minister promised to invest widely in agriculture and though not spelt out in detail, we hope that there will be enough funds for agriculture infrastructure such as irrigation in the coming year. In the face of increasing climatic uncertainties, irrigation is one area that needs special attention of the Government.

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Farmers in India are provided with short term crop loan with interest subvention of 2% and the budget allocates Rs 18000 crore for the subvention scheme. In addition, in this budget, the interest subvention scheme is also extended to the self-help groups (SHGs) of all districts. This is a welcome move as our field-based research shows that loans taken by self-help groups formed by women help the farming and farming related activities of their households
as well. However, the SHG programme is not evenly developed in the country. While southern India has a well developed SHG programme, North East India for example, needs substantial improvement in coverage. Secondly, SHGs are primarily women-centric and there is a need to develop farmer-groups under the SHG model. Though there has been some progress in this direction this move needs to be much more widespread. The landless tenant
farmers are often unable to access formal loan due to not having land records and hence are not able to get the benefit of such subvention scheme for short term crop loan. Formation of self-help groups would help landless tenant farmers to obtain formal loans at subsidised rates now.

Farmers in India today face immense risk due to climatic aberrations as well as volatile prices. Even when production levels are satisfactory, farmers income remains a cause of concern. Pradhan Mantri Fasal Bima Yojana has been able to give some relief to the farmers for crop loss due to climatic aberrations. The budget allocation this year for Fasal Bima Yojana has increased from Rs 12975 crore (in 2018-19) to Rs 14000 crore. Though the crop
insurance scheme provides relief to the farmers, it usually covers only the cost of cultivation and not the potential value of output. In other words, for the loanee farmers it is only the bank loan that is protected by the crop insurance schemes. However, the farmers also need support to maintain themselves during the interim period, in the face of crop loss. Hence it is time to consider an insurance cover for the value of crops to provide better support for farmers during crop loss.

Though there are policies to protect farmers against the risk of price fluctuations through the support price mechanism, improvements are still required at the level of implementation. In an earlier budget, the Government had promised 1.5 times the cost of cultivation as minimum support price (MSP) to the farmers and the scheme was to encompass all the crops not included so far. To help agriculture marketing and better price discovery, the E-NAM online platform was also created. In this budget also it is promised that the Government would work with State Governments to allow farmers to benefit from the e-NAM platform. Marketing and price discovery are certainly areas that need special attention at the implementation level as a large number of small and marginal farmers still do not get the benefit of a reasonable price for their product. Unless we ensure remunerative price to the small, marginal, and landless tenant farmers, their distress would continue to bog down the agricultural sector.

Observing the current state of farmers’ income, the Government has envisioned a goal of doubling of farmers’ income by 2022, when the country will complete 75 years of independence. Given that 80% of Indian farmers operate on small and marginal landholdings, their income cannot be increased drastically through agriculture alone. Considering that income per non-agricultural worker is much higher than income per cultivator, indicating much higher earnings among non-farm workers, developing the non-farm sector to provide additional income to the farmer is essential in achieving this policy goal. This budget talks about developing certain traditional industries in rural areas, based on honey, bamboo and khadi, through the SFURTI scheme. However, there needs to be a larger investment in food processing and other industries in rural areas keeping in view the local agricultural produce of the region to improve the non-farm income of farmer households. This would indeed help farmers to improve their overall income and allow them to continue farming as a viable enterprise.

  • Meenakshi Rajeev is Professor, ISEC. Views are the author’s own.

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