Why budgets in recent years failed to solve the agrarian crisis
Despite visible increases in budgetary allocations for the agricultural sector, the Modi government has failed miserably to find a solution to the problems of farmers. Liberalisation and various government actions like demonetisation adversely affected the rural economy.
As Nirmala Sitharaman gears up to present the maiden budget of the second Modi-led National Democratic Alliance (NDA) government, the challenges before her are aplenty. With the unemployment rate reaching a four-decade high of 6.1 per cent, and GDP growth rate falling to 5.8 per cent in the last quarter of 2018-19, concerns are being raised on the economic status of the country. Clearly, the Narendra Modi government will be looking forward to provide answers to the critics with the upcoming Union Budget 2019-20.
One of the major challenges before the government will be the agrarian crisis. The issue has worsened in recent years, food price inflation staying consistently below four per cent, despite the increases in fertiliser prices and overall cost of production. Although the NDA-1 government didn’t give the much needed emphasis on farmers’ problems in its first two years, there was visible increases in the allocations for the agriculture sector in the last three budgets, including the interim budget of 2019-20.
However, the Modi government has failed miserably to find a solution to the problems of farmers. Liberalisation and various government actions like demonetisation adversely affected the rural economy.
In the interim budget of 2019-20, presented by Piyush Goyal, the government had introduced Pradhan Mantri Kisan Samman Nidhi Scheme, which pledged to provide Rs.6,000 per annum to about 12 crore small and marginal farmers. Rs.75,000 crore was allocated for the financial year 2019-20, in this regard. However, as obvious it is, Rs.6,000 per year to a farmer’s family (which means, Rs.16.7/day) is clearly insufficient.
Finance Minister of Kerala, Thomas Isaac said:
There was special focus on agriculture in the 2018-19 budget as well, with the then Finance Minister Arun Jaitley announcing an Agri-Market development fund with a corpus of Rs.2000 crore, apart from earmarking funds for development of irrigational facilities and interest waivers.
Another major announcement of the year was the increase in Minimum Support Price (MSP) of crops to 1.5 times the cost of production. However, this didn’t help the cause either, for multiple reasons. Cost of production varies from state to state, but MSP is an average of the costs across the states. So, farmers in the states with higher cost of production failed to get benefit of the rise in MSP. Low cost imports from other countries also affected the profitability of agriculture in the country.
R Ramakumar, professor of economics TISS, said:
In the 2016-17 budget, the government had promised to double the farmers’ income by 2022, allocating Rs 35,984 crore for the same. However, this also turned out to be an eyewash as nothing materialised in benefit of the farmers. Ramakumar blamed demonetisation for the crash in prices of the agricultural commodities.
Nevertheless, the people have given a second chance to Modi government, and the farmers will be expecting much in the Union Budget 2019-20. Populist measures such as farm loan waivers won’t be enough to solve the farm distress. Scant monsoon rains could also aggravate the problems of farmers.
If the government plans to increase the prices of food crops, it will also have to make sure that the food commodities are affordable to everyone. The challenge before the government will be to strike the right balance, if it has any intention to revive the rural economy.