Lifting rural productivity

Govt does well to abjure populism in Budget

Contrary to conjecture, the Union Budget for 2017-18 has not made any populist pro-farmer announcement to influence rural voters in the on-going elections in five states. It has also, per se, not sought to compensate them for the ill-effects of demonetisation and the recent sharp slump in agricultural prices with more subsidies or other fiscal doles. Instead, it has chosen the more judicious path of strengthening the rural economy through well-judged measures to lift farm productivity, raise farmers’ income and generate more employment in rural areas. For this, the total allocation for the agro-rural sector has been hiked by the highest-ever margin of 24 per cent. More funds have rightly been earmarked for irrigation; soil health-based efficient use of costly cash inputs; better marketing opportunities; risk-hedging through insurance coverage; and post-harvest value-addition of farm produce. Promotion of contract farming is also a well-advised step to link farmers, particularly producers of perishable items such as vegetables and fruit, with end-users to bypass the middlemen-dominated mandis. Revamping of the Mahatma Gandhi National Rural Employment Guarantee Act scheme (MGNREGA) and higher funding for the National Rural Livelihood Mission and skill development programmes are also intended to create additional employment and income generation potential in the rural belt. These measures, moreover, can be expected to boost rural demand for wider economic gains.

Finance Minister Arun Jaitley seems to have realised the futility of the past practice of announcing a slew of new schemes and piecemeal measures in every Budget that failed to deliver perceptible results. Nor have they helped to alleviate rural distress — which has, in fact, tended to exacerbate with time — as reflected in the unabated incidents of suicides by farmers. He has, therefore, looked for lasting solutions to farmers’ woes by perking up the sector’s resilience against recurring shocks, especially weather-induced mishaps such as droughts. Higher funding for irrigation, construction of ponds to conserve rainwater, and promotion of more efficient micro water-dispensing systems like drip irrigation can be viewed as a step in that direction. Significantly, the Budget has tweaked the MGNREGA to reorient it towards creating durable and productive assets to stimulate the rural economy. Creation of 500,000 ponds, in addition to the one million created last year, with MGNREGA funds can, indeed, contribute to drought-proofing of Indian agriculture. 

That said, the truth also is that many gaps still remain to be plugged in enhancing the viability of Indian agriculture. A misdirected flow of institutional credit is a case in point. Though the total agricultural credit in 2017-18 is proposed to be stepped up to a record Rs 10 lakh crore, nothing has been mooted for how to target it better. Much of the highly subsidised credit now flows to the same set of farmers who are capable of repaying it in time because interest subvention is linked to timely repayment. Besides, the institutional credit is disbursed largely as short-term crop loans, leaving unfulfilled the farmers’ need for long-term loans to invest in productivity-oriented measures. This apart, the Budget has not laid adequate emphasis on the generation and transfer of new technology that is vital to raising production and reducing costs. Had such aspects also been addressed, the gains from the Budget would have been far greater.