Budget 2018 – Expectations for the agricultural sector

When the Gujarat state assembly results were declared in December 2017, one underlying trend stood out starkly for the ruling BJP. They had done exceedingly well in urban centres but had ceded ground in most of the rural pockets to the Congress. The message was quite clear that victory in Gujarat was more because Gujarat was relatively more urbanized compared to other Indian states. But farm distress, falling farmer incomes and falling output were surely taking a toll on the government’s popularity. The obvious corollary was that the budget will focus on agriculture and rural sector in a big way. After all, it was the Modi government that had promised to double farm incomes by 2022. Here are 5 things that are expected from Budget 2018

An action plan for doubling farm incomes by 2022

This could the first budget by the Modi government which is likely to offer a tangible game plan to double farm incomes by 2022. If we are talking of doubling farm incomes in 5 years we are talking about farm incomes growing by nearly 15% each year. That is not possible without something really drastic. Farm loan waivers can, at best, alleviate the distress of farmers. It can do little to improve farm incomes. For that kind of a quantum leap, Indian agriculture will require the equivalent of the dams undertaken by Pandit Nehru or the Green Revolution undertaken by Mrs. Gandhi. We expect to hear some very tangible and time-bound action plan to actually achieve the doubling of farm incomes by 2022 as committed by this government.

Holistic plan for rural incomes

The budget is likely to make a shift from purely looking at agri income to opening up more job opportunities for the farm sector in India. Agriculture is not just about growing crops. It is a complete ecosystem. This year we could see a big boost to the allocation under the Pradhan Mantri Fasal Bima Yojana for crop insurance. The government may also put in place a system for not only fixing attractive MSP but also ensuring that the farmer actually realizes the MSP. That has been the challenge last year when farmers have been forced to sell their produce in distress at below the MSP levels. While looking at the eco system, the budget is also likely to vastly expand the rural employment guarantee schemes so that the plight of farmers can be reduced with alternate sources of income.

Creating the right support system for agriculture

Even before the crop comes into the market, there is a complete support system that has to be fine tuned. This budget could focus on that. The budget could offer easier financing and interest subvention schemes. The government could also encourage the use of hybrid seeds through appropriate incentives to improve output. The government will also focus on post-harvest infrastructure in a big way. A major chunk of the perishables like vegetables and fruits tend to get wasted due to the lack of proper warehousing and cold storage facilities. This budget is likely to focus in a big way on post-harvest infrastructure to reduce wastage and improve the yield for farmers.

Creating a national electronic market for agriculture output

This remains a major challenge. The farmers are currently required to only go through the state mandis which results in higher costs and more wastage. Also, the farmers are at the mercy of the brokers at the mandis and other wholesale market places. While this is largely a state subject, the government can adopt the same approach as RERA. Once the government passes the central act and the initiative is taken by the BJP ruled states to implement the national electronic market for agriculture, then other states will have no choice but to follow suit. If that happens, the farmers can not only sell at the farm gate itself, but they can also use futures to hedge their price risk. This national electronic market implementation could get a big boost in this budget.

Expanding the scope of agriculture to include dairy and animal husbandry

Unlike the agri sector which is struggling to grow, the dairy sector and the animal husbandry sector have been growing at nearly 14-15% per annum. The forthcoming budget could the take a step forward to treat dairy and animal husbandry at par with agriculture both in terms of greater fund allocation and income tax benefits. The daily and animal husbandry sector put together is nearly 1/3rd the size of the agricultural sector and has been growing despite not getting the same benefits as agriculture. This budget may look at these kinds of related sectors to put the focus on.

There is so much more that this budget can address, but most importantly, this budget needs to address the target of doubling the farm incomes by 2022. That could be the biggest challenge for the farm sector and for the current government.

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