2-February-2024-Special-Article

IGNORING AN AGRICULTURAL SECTOR IN DISTRESS

The government’s financial plans and budget for 2024-25 have come under scrutiny for seemingly prioritizing a positive image over addressing pressing issues in agriculture.

Special Provisions for Agriculture in the Budget:

Agriculture GDP Growth: In 2023-24, the Agriculture GDP grew modestly by 1.8%, a decline from the previous year’s 4%.

Budget Allocations:

• Department of Agriculture and Farmers Welfare saw a marginal increase of 0.6%.
• Department of Agricultural Research and Education received a slight bump of 0.7%.
• Ministry of Fisheries, Animal Husbandry, and Dairying experienced a substantial 27% budget increase.
• Overall budget support for the agri-food sector, including schemes like PM-KISAN and PM-Fasal Bhima Yojana, amounted to Rs 5.52 trillion for FY25, slightly lower than the Rs 5.8 trillion in FY24.

Food and Fertilizer Subsidies:

• Food subsidy reduced to Rs 2.05 trillion in FY25, marking a 3.3% drop from FY24.
• Fertilizer subsidies decreased from Rs 1.89 trillion in FY24 to Rs 1.64 trillion in FY25.

Official Data on the Agricultural Sector:

Decline in Agricultural Prices:

• Official data reflects a significant decline in agricultural prices, leading to reduced farmer incomes.
• The sectoral deflator in agriculture dropped from 9.4 in 2013-14 to 3.7 in 2023-24.

Slowed Growth of MSP:

• Minimum Support Prices (MSP) for major crops experienced a notable slowdown, reducing from an 8-9% annual increase (2003-04 to 2012-13) to about 5% (2013-14 to 2023-24).

Drop in Farmers’ Incomes:

• Despite the promise to double farmers’ real incomes from 2015 to 2022, incomes from cultivation fell by about 1.4% between 2012-13 and 2018-19.

Rising Rural Unemployment:

• Rural unemployment rates increased, remaining higher in 2022-23 compared to 2011-12.

Stagnation of Rural Wages:

• Real wages in rural India have not increased since 2016-17 and even decreased after 2020-21.

Lack of Capital Investment:

• Capital investment in agriculture and allied sectors didn’t witness an increase, with a significant portion of long-term bank credit intended for agriculture diverted to corporates and agri-business firms.

Issues with the Government’s Report:

Selective Data Presentation:

• The government’s report highlights an increase in agricultural production but neglects the overall decline in growth rates.
• Growth rates dropped from 3.1% annually (2003-04 to 2010-11) to 2.7% (2011-12 to 2022-23).

Ignoring Yield Decline:

• The report omits the significant fall in yield growth rates, from 3.3% per year to 1.6% per year.

Budget Cuts in Agriculture:

• The 2024-25 budget plans to reduce spending in crucial agricultural areas, including fertilizer subsidies and rural infrastructure projects.

No Clear Strategy for Growth:

• Both the report and the budget lack a comprehensive plan to revive agricultural growth, with no significant measures to address the ongoing decline.

Unchanged Support Despite Inflation:

• Allocations for the PM-Kisan scheme remain the same as in 2019, not accounting for inflation, reducing the real value of cash transfers to farmers.

Recommendations:

• Rationalize Food Subsidy: Implement rationalization of the food subsidy system to save around Rs 50,000 crore.
• Redirect Subsidy Savings: Use saved funds for enhancing agricultural research and development, particularly in areas like micro-irrigation.
• Reform Fertilizer Subsidies: Shift from subsidizing urea to direct cash transfers to farmers, expected to save Rs 30,000-40,000 crore.
• Focus on Sustainable Agriculture: Allocate saved funds towards sustainable agriculture practices crucial for ensuring food security under climate change challenges.

Mains Question:

1. Critically analyse the government’s financial plans and budget for 2024-25 with regard to the agricultural sector. (150 WORDS)