Atmanirbhar & rural growth: Need to make all the right noises

The adverse impact of the Covid-19 pandemic on agriculture and rural areas has been lower than the urban areas. While the lockdown due to Covid adversely affected the performance of the non-agricultural sector, the growth rate in agriculture will be around 3.4 per cent in 2020-21 (FY21). However, agricultural and rural incomes are still low, as the terms of trade are not in favour of agriculture.

Farmgate prices are low. The reduction in remittances due to reverse migration and lower growth in rural wages led to low incomes in rural areas. The informal sector workers bore the brunt of income loss and employment during the Covid period. In other words, we have a K-shaped recovery and these inequalities are also applicable to agriculture and rural areas.

The Economic Survey argues for a fiscal recovery push. Therefore, one expected more allocations to farm schemes and agricultural and rural infrastructure in the Budget to improve growth and employment.

Under the Atmanirbhar package, the government has pumped funds into Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGA), Pradhan Mantri Garib Kalyan Yojana, and PM-Kisan. This has increased some purchasing power in rural areas. Some of the announcements in this Budget are enhancement of credit to Rs 16.5 trillion, increase in rural infrastructure development fund from Rs 30,000 crore to Rs 40,000 crore, doubling the micro irrigation fund from Rs 5,000 crore to Rs 10,000 crore, enhancing the Operation Green scheme to include 22 perishable products, integration of 1,000 more mandis with National Agriculture Market (eNAM), use of agriculture infrastructure fund for agricultural produce market committees (APMCs), increase in Customs duties for some agriculture and allied products and agriculture infrastructure and development cess. Some of these measures may be in the right direction, but it is not clear how these measures will improve the income of farmers. There is marginal increase in the allocation to agriculture and allied activities from Rs 1.45 trillion in FY21 to Rs 1.48 trillion in 2021-22 (FY22) — an increase of 2 per cent. 

The government has not increased the allocation to rural development. The expenditure for total rural development schemes declined from Rs 2.16 trillion in FY21 to Rs 1.95 trillion in FY22. MGNREGA generated 3.2 billion person days so far in FY21. This is more than 21 per cent, compared to the 2.65-billion person days created in 2019-20. However, the allocation to MGNREGA declined from Rs 1.11 trillion in FY21 to Rs 73,000 crore in FY22. Similarly, there was no increase for integrated child development services expenditure. It is not clear how stimulus will be created in agricultural and rural areas. 

The Economic Survey says the recent agricultural reforms are ‘a remedy, not a malady’. The laws can be made more farmer-friendly to remove their fears. The Fifteenth Finance Commission has also given an incentive plan to states to undertake farm reforms. States that improve exports, diversify production and markets may get incentives.

The Rs 1-trillion agriculture infrastructure fund should be incentivised. The use of these funds for APMCs is a good decision. Similarly, the increase in farm producer organisations should be taken up to help small and marginal farmers. Exports have to be pushed aggressively. Around 51 per cent of micro, small and medium enterprises (MSMEs) are in rural areas and they have to be revived. India can’t become atmanirbhar without dynamic MSMEs. The impact of the measures announced depends on their successful execution.

Agriculture and rural revival is also important for creating demand. Agriculture is a state subject and the Centre has to work within the framework of cooperative federalism. The central government has to work closely with states in transforming the agriculture and rural sector, keeping in mind the goals of growth, equity, and sustainability.

The author is director and Vice Chancellor, IGIDR, Mumbai