Economic Highlights

New Delhi, 29 January 2024

Grappling Farm Sector

DESI REMEDY, MORE FUNDS VITAL

By Shivaji Sarkar 

The agricultural sector anticipates a significant shift towards a ‘desi farm economy’ and increased budget allocations in the upcoming fiscal year.This prospect is not merely wishful thinking; it aligns with the objectives outlined in the 2017 Niti Ayog paper, which aims to double farm income. 

However, the recent budget for 2023-24 witnessed a reduction in allocations from Rs 1.33 lakh crore to Rs 1.25 lakh crore, marking a decrease of Rs 8 lakh crore or one percent. This reduction is noteworthy as the agricultural sector received only 2.78 percent of the total budget, down from 3.78 percent in the previous fiscal year. 

In the 2021-22 budget, allocations were initially set at Rs 1.33 lakh crore but were later revised to Rs 1.18 lakh crore due to unspent funds. The 2023-24 budget indicates a Rs 3 lakh crore increase, primarily directed towards interest subventions, signalling a concerning rise in farmers’ debts. 

Finance Minister Nirmala Sitharaman prepares an election budget, and as matter of convention it limits the introduction of new measures. However, considering the crucial role of the agriculture sector, accounting for over 54 percent or approximately 78 crore people, it deserves special attention. The Economic Survey for 2023-24 highlights a decline in public spending in the sector to 4 percent in 2022-23, following prolonged farmer protests against market reforms. 

Despite the repeal of the three farm bills, corrective measures are essential to ensure farmers’ independence from large-organised business sectors. The Indian farm sector is grappling with severe economic distress, exemplified by over 296,438 suicides by farmers during 1995-2013 and 100,474 between 2014 and 2022.An average growth of farming family incomes had an average growth of 0.44 percent between 2011-16, according to Niti Ayog. 

The developed world shows that small farmers are out of agriculture and have not been able to increase farm incomes. The US itself has a mere 1.5 percent in agriculture and facing difficult situations. The current climate scenario further exacerbates challenges, with the potential for drought-like conditions and a decline in rabi yields. The dependence on rain-fed agriculture remains a concern, mirroring trends in neighbouring countries such as Nepal, Bangladesh, and Pakistan. 

Agricultural production, particularly wheat, has faced setbacks due to unexpected weather patterns. In March 2022, a heatwave led to an 11 percent lower-than-anticipated wheat yield, contributing to a decline in production. Similarly, heavy rainfall in October 2022 and subsequent years affected various crops, highlighting the vulnerability of the agriculture sector to climate fluctuations. 

Price volatility in essential commodities like potatoes, onions, garlic, and ginger further compounds the challenges faced by farmers. The Reserve Bank of India's firming up of interest rates adds to the burdens faced by both the farm and industrial sectors.Despite the worsening climate situation, the budget for National Innovations in Climate Resilient Agriculture (NICRA) has seen a reduction from Rs 50 crore to Rs 41 crore undermining efforts to address climate challenges in farming.

The total wheat production in the country has been steadily rising at 3 percent CAGR between 2014-15 and 2021-22. As per the Indian Meteorological Department, certain areas in India experienced a heatwave in March 2022. The maximum temperature was 33 degree Celsius, 2 degree more than normal. As per a study by the US Foreign Agricultural Service, wheat yield in March 2022, in wheat growing areas was 11 percent lower than anticipated.  Wheat production declined by two million tonnes in 2021-22. 

Similarly, in the first two weeks of October 2022, crops such as paddy, cotton, blackgram, vegetables, soybean, and bajra were affected across five States due to heavy rainfall. The year 2023 has not been different.Fluctuating yields of Vegetables like potato, onions, garlic and ginger are causing price volatility. This season also witnessed farmers throwing away cauliflower and tomato, though retail prices remain high. This is a concern of the RBI, which is gradually firming up the interest rates causing burden for the farm and industrial sectors alike. 

The policy direction advocated by the Niti Ayog 2017 report, aiming to shift 40 crore farm labour to low-wage urban employment, has not yielded the intended results. Instead, it has displaced farm labourers, increased migration, and raised labour costs for the agricultural sector. This flawed policy, influenced by international organisations such as the World Bank, has been counter-productive and needs correction. 

Depletion of dependence on the farm sector has not proved profitable for the economy. The developed countries are suffering from this policy.Farm gate prices remained static from 1985 to2005 at $23 in India and more or less elsewhere in the world, according to UNCTAD. 

Minister for Agriculture Narendra Tomar told the Rajya Sabha on 16 December 2022 that average monthly income per agricultural household as per NSO is Rs 10218, an average Rs 2.2 lakh a year, about Rs 2000 a month per person for a family of five. The Economic Survey in 2016 says in 2016 it was Rs 1700. The farmers find Rs 6000 a year Kisan Nidhi pension and free food dole a great relief.One forgets that they cannot afford the food they themselves produce. What farmer sells for Rs 2 is sold to retailer at varying prices of Rs 30 to 100. 

The road sector, seen as a beneficiary for farmers selling land, often proves detrimental due to toll expenses. The road expansion, touted for benefits, causes severe inflation. The Consumer Price Index touched an all-time high of 186.3 points in July 2023, with an average inflation of 5.5 percent, resulting in a cumulative 33 percent rise in prices between 2016 and 2022. 

The farmers’ losses are high, consumers pay through the nose and the Government debts increase phenomenally.This situation demands introspection. Despite private investments not increasing, expenses on infrastructure and tolls are escalating.Sitharaman must reassess farm economics to correct the budgetary course. A comprehensive review and revamp of policies are essential to align with the agricultural base, fostering the ‘desi economy’. This shift could pave the way for genuine growth and happiness amid global turmoil.---INFA 

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