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Farm Distress Has Govt Attention but Economic Slowdown May Tighten Purse Strings in Budget

Newly elected Finance Minister Niramala Sitharaman will present her maiden budget on July 5, in which the stress on the rural economy is expected to be a major factor.


Updated:June 28, 2019, 10:32 AM IST
Farm Distress Has Govt Attention but Economic Slowdown May Tighten Purse Strings in Budget
Representative image

New Delhi: After tall promises by the BJP-led NDA parties during the election campaign, Union Budget 2019 is expected to incline itself towards the growing farm distress in the country.

Dissatisfied farmers formed a major part of the BJP manifesto for the Lok Sabha elections. As newly elected finance minister Niramala Sitharaman will present her maiden budget on July 5, the stress on the rural economy will be a critical component of her debut.

The first decision of the government was to expand the coverage of the PM-Kisan scheme. Announced in the interim Budget on the eve of the Lok Sabha elections, PM-Kisan sought to cover 9.5 crore small and marginal farmers (SMF), owning up to five acres of land.

The interim budget provided Rs 75,000 crore for this direct benefit transfer into bank accounts of SMF. The government estimates that expansion of PM-Kisan will cover an additional 5 crore farmers, taking total beneficiaries to 14.5 crore farmers. It is now estimated to cost Rs 87,000 crore.

The actual number of farmers in the country is not known and the estimate of 14.5 crore comes from the Agriculture Census of 2016.

The road to providing benefits to farmers may not be smooth for the Centre. The fiscal space for the government is constrained. In the interim Budget, the estimated increase in revenue is 18 percent for GST, 32 percent in personal income tax and 15 percent in corporate tax.

The economic slowdown will make these targets even more challenging. With higher MSPs (Minimum Support Prices) and bulging procurement, food subsidy bill may also rise in the current financial year.

Outstanding debt of Food Corporation of India (FCI) from the National Small Savings Fund is estimated to be Rs 1.81 lakh crore. In FY19, according to revised estimate, FCI was to get Rs 1.4 lakh crore from the government, but it received only Rs 80,000 crore.

Sooner than later, the food subsidy will have to be fully paid from the budget. There are several other instances of government expenditure in various sectors through National Housing Board, NABARD and Rural Electrification Corporation not being reflected in the budget.

Another major decision of the Modi 2.0 government was to complete vaccination for Foot and Mouth Disease (FMD) and Brucellosis of livestock. ICAR (Indian Council of Agricultural Research) had estimated that the country suffers a direct loss of Rs 20,000 crore due to the drop in milk production and draft power.

The vaccination programme has been going on from FY04 and till 2016, it was fully funded by the Centre. In FY16, on the recommendation of the 14th Finance Commission, the Centre increased the share of states in the devolution of funds to 42 percent from 32 percent and the central funding was reduced to 60 percent from 100 percent.

This had an adverse impact on the vaccination programme and several cases of FMD have been reported in Maharashtra. The decision of the government to restore central funding to 100 percent will provide the required fillip to the vaccination programme. It will result in higher milk production. In 2018, the World Organisation for Animal Health conducted an evaluation of India’s veterinary services and flagged several shortcomings. If FMD vaccination programme has to succeed, the shortcomings have to be removed.

Moreover, it may provide better market access to Indian meat in China, the US and EU as they do not allow the import of buffalo meat from India. China takes Indian meat through Vietnam. If India is declared free of FMD, the export of buffalo meat can go up substantially and unit realisation from exports can also rise.

The new finance minister seems to be taking steps in this direction already.

Nirmala Sitharaman last week started her pre-Budget stakeholder consultations for this year with a meeting on agriculture and rural development.

Asserting that the concerns of the agriculture sector are high on the priority of her government, Sitharaman focussed on measures to boost economic and social infrastructure of the rural sector and ways to eradicate unemployment and poverty through the development of both farm and non-farm sectors, according to an official statement.

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| Edited by: Aakarshuk Sarna
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