Budget 2019 India expectations: Why Modi government should focus on agriculture

Budget 2019 India: There is a need for agri-start-ups to be emphasised in the upcoming Union budget.

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Union Budget 2019: We could expect the budget to focus on increasing availability of institutional credit to farmers to help meet input costs and other expenses for farmers, says Harsha Razdan

By Harsha Razdan

Budget 2019: In February 2019 the Interim Finance Minister had presented an interim budget, which centered around rural growth and development and focused on the ‘aam aadmi’ – mainly encompassing farmers and rural consumers. A rapidly growing rural economy is likely to have a stronger impetus on India’s growth story. Considering the socio-demographic landscape today, here is a quick outline of what we can expect to foresee in the upcoming budget from an agri perspective –

Schemes focused on additional income or financing support to farmers may be critical

  • The agricultural sector has been high on the government’s priority list as it plans to focus on long-term investments and supporting farmers either by additional income or financing arrangements. The interim budget included a direct income support (DIS) scheme of transferring INR6,000 annually to small and marginal farmers. This is expected to be viewed as a welcome move, as it is expected to marginally benefit farmers across the country. However, the quantum and coverage of this scheme are suggested to be expanded in the Union Budget 2019.
  • We could expect the budget to focus on increasing availability of institutional credit to farmers to help meet input costs and other expenses for farmers.

Address farmers’ distress and improve their income level

  • The government may provide incentives for adoption of farm mechanisation to improve yields.
  • We could expect some focused efforts towards building infrastructure to promote farm to fork concept, to ensure reduction in middle men between farmers and consumers, to improve realisation of farmers for his produce.
  • There could be schemes around incentive/promotion for creating storage facilities for farm produce to ensure better shelf life, reduction in losses/wastages due to improper storage, allow farmers to sell the produce as per their convenience and provide loans at cheaper rates against such produce.
  • To address farmer distress, we could expect the government to focus on expanding the reach of Pradhan Mantri Fasal Bima Yojana (PMFBY). We can anticipate efforts to expand reach of the scheme to all the farmers in the country and educate them to report and make claims under the scheme, so that they are benefitted from the scheme
  • With a view to aid farmers with additional income there could be a further increase in MSP. However, this could also lead to inflation and hence the government will need to be cautious of an MSP increase.
  • Going forward, the government may also consider to create a fund to ensure price stabilisation for certain crops (that are out of MSP).

Availability of water to aid irrigation

  • There need be augmented efforts to increase macro-irrigation and micro-irrigation coverage to reduce dependencies on monsoon failures. Further, having adequate water could help in using modern irrigation and farming techniques thereby leading to overall input efficiency and better crop productivity.
  • In the wake of poor monsoons or natural calamities, it is imperative that the budget allocates appropriate focus to provide assistance to all farmers affected. This could be either by way of an interest subvention or making small concessions or repayment incentives or part-loan waivers in a few cases. Subsidy programmes and insurance schemes may continue to be a focus area in order to protect the farmer.
  • The government could invest in increasing penetration towards crop insurance and introduction of technology for accessing losses and faster claim settlement.

Agri and allied agri-industries: Post-harvest management primarily targeting creation of secondary processing infrastructure to address price volatility mainly for perishable produce. We could expect some push with reference to GST relief on some farm items such as milk products in continuation of tax exemptions to agriculture cooperatives. We could also expect some tax holidays being provided for setting up agri or agri-infrastructure businesses.

Produce storage: Under Rashtriya Krishi Vikas Yojana (RKVY), farmgate and near-farmgate storage could be developed on priority to enable small producers to hold the produce till market prices are remunerative enough to sell.

Agritech start-up: There is a need for agri-start-ups to be emphasised in the upcoming budget. These could be relating to setting up a start-up growth fund or strengthening of cold chain infrastructure, increasing agricultural exports or establishing innovation labs.

In summary, we expect the budget to be focused around farmer upliftment keeping rural growth and development at the centre. India’s growth agenda is ambitious and agriculture is likely to be a key imperative for the government.

(The author is Partner and Head – Consumer Markets, KPMG in India. Views are his personal)

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