Funding Agriculture is not Socialism
- In Economics
- 07:07 PM, Mar 14, 2016
- Ajay Kuligod
Agriculture budgetary allocation saw a significant increase, approximately 80% compared to last year. Last 2 seasons have been very bad for the Indian farmer with continuous droughts. The number of farmer suicides have been rapidly increasing. The El Nino and falling oil prices has made the matters even worse. Special focus of agriculture is a step in the right direction by the Modi government both economically and politically.
That agriculture, has to be the prime focus of the government is a no brainer. But many prominent commentators and even some staunch supporters of the BJP, especially the upper middle class seems to be not very satisfied with the government’s move. Some see this budget as a Modi government’s shift toward the economic left. The accusations are far-fetched and backed by no good data.
Well, here are some facts and figures that can be an eye opener. In the last 10 years the private sector has been able to create only about 2.5 million jobs which is just a fraction of the total available workforce. About half of our population is directly or indirectly dependent on agriculture. Now even if the private sector all put together creates twice the jobs it has produced in last 10 years, it will still not be able to create enough decent jobs. Let’s get it straight, agriculture sector will remain one of the top employment providers in India we have not yet found a formidable replacement to agriculture, neither manufacturing nor services has been able to match it in scale. It should not be very difficult to understand that we will not be able to create enough well-paying jobs in the private sector to migrate most farm-jobs from rural to urban areas with existing policy and post-liberal era of economic reforms. Therefore the solution is to put a high focus on agriculture so that majority of our work force is employed and makes a decent living during Rabi/Kharif seasons. And the same workforce is at least partially employed during all other times with help of schemes like MNREGA. Therefore the thrust on rural infrastructure in budget 2016 makes sense, the government’s focus should be on creating assets like canals, roads, schools, highways in rural areas. This will not only strengthen the rural economy in long run but also boost immediate rural demand.
Now, on government’s focus to double farm income. Many critics believe that this is not a realistic target to achieve, even if achieved there would be ill effects like high inflation on the economy. These are not very sound arguments. There is a method and strategy to double the farm income in the budget. When carefully observed the government has focused on cattle welfare, irrigation and fertilizers all of which act as allied factors in agriculture. Clearly if these factors are optimized not only save the farmer on his input cost but also maximize his yield. The direct benefit transfer of fertilizer shall curb the leakages and cut down on input costs for the farmer. Fertilizer is in the top 3 subsidized item in the government’s accounting books. Any substantial reduction in it is highly welcome.
Water is a multiplier in agriculture. Increasing the irrigated area under the “Pradhan Mantri Krishi sinchai yojana” shall go a long way in increasing crop productivity only adding to farm income. The increased funds via NABARD and AIBP are also welcome steps, remember only 20% of our total cultivable land is irrigated 70-80% depends on rainfall.
Increased allocation to animal welfare schemes and Rs.850 crore for dairy development fund are motivated by the fact that large number of rural household also engage in cattle breeding and dairy. India being the 2nd largest producer of milk, there is lot of scope for milk exports to Europe, Russia and China all of which are facing milk shortage. By encouraging the farmer to maintain or increase his cattle, the farmer would benefit from the increased milk production. Investments in infrastructure shall improve the quality of roads and create storage facilities that the farmer could leverage and obtain the right market price for his produce. Then the budget talks of creating a National Agri e-markets, this will also go a long way in cutting out the middlemen and transferring profits directly reaching the farmer. Also these factors in totality would help double the farm income. By the way, the average family income for a rural household is about Rs.6000 a month. Is doubling that to about Rs.12000 per month in the next 5 years even a question to ask?
There has been lot of talk around the “krishi kalyan cess” that it shall put extra burden on the tax payer. Let’s not forget that India still has one of the lowest tax to GDP ratios in the world. Given the mess that the UPA government has left us we still have a fiscal deficit to overcome. Where will the money come from? May be the government should have come with a more creative way like a carbon tax to fund replace the Krishi kalyan cess, but let’s not forget we still have to raise that money, our accounts are still under the deficit pressure. Let’s be fair and give the government credit that it has been honest in its effort in this regard.
Several reports from Asian Development Bank and World Bank point out that climate change has a great impact on India, with Indian agriculture highly dependent on monsoon any small change in the rainfall pattern creates havoc and puts pressure on our food security, the recent price surge for tur dal is only a small example. In that case is it not the best interest of our country to maintain our domestic food demand and have a fine balance between farm and non-farm jobs. Therefore high focus on agriculture so that we don’t face any major food crisis from a climate perspective is also justified. Crop insurance which has been allocated about Rs.5500 crores in this budget is also a great step in this direction of covering the farmer in case of any immediate climate threat. There is no country on this planet that can supply food to 1.25 billion people. We have to produce our own food. “Make in India” first should be tailored for agriculture.
Of course, there are shortcomings in this budget, like not talking about funding R&D in agriculture universities or funding to improve the yields of tur dal, oilseeds which we heavily import. But this budget is a good start in the effort to focus on agriculture growth. One report of the World Bank suggests that for every dollar invested in agriculture the return is about 8 dollar to the general economy.
If 18th century was about industry, 19th of oil and 20th of information technology, then this century belongs to countries who better utilize their natural resources, food being the paramount of all the challenges.
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