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No bumper harvest for agriculture likely in Budget

For the sector that employs nearly half of the Indian population but had a mere 17% share in country’s gross domestic product (GDP) in 2014-15, Budget 2017 is a crucial one. While some are very positive that the government would dole out goodies for agriculture and allied activities, others believe the focus would be on measures such as housing, infrastructure, employment and income tax relief.

A senior State Bank of India official said he is sanguine that the government would keep farmers’ interest in mind.

“Before Budget only they have announced interest waiver. But apart from that, I expect some concession for farmers. Mostly, they will focus on small and marginal farmers. Mostly, it will be related to KCCs (Kisan Credit Cards) – how KCCs can benefit the farmers more.”

While it is imperative that the Budget would take measures to stimulate growth, it would be a bit of a stretch to expect any big-bang announcements for the sector.

“You need money for that. The Budget doesn’t have too many resources and cannot do too much,” said D K Joshi, chief economist, Crisil.

“They have to take forward their earlier programmes which is insurance, focus on irrigation, but not the large irrigation size, the water-conserving drip irritation,” he said.

So, what is most anticipated?

D K Srivastava, chief economic advisor, EY India, said, “The government may come out with a number of rural schemes which may benefit farmers. There can be a significant impetus on housing, both in terms of subventions that can relate to private housing and in terms of government’s own building of rural houses; there can be additional Budget allocation. Because most of the agriculture is state subject, the government can best provide support to state governments for their irrigation projects and so on.”

Joshi of Crisil has the same view.

“There has been some hit to the economy from demonetization. So, there will be stress to boost consumption, and at the same time, not losing sight of public investment. I think the focus will be on roads, low-cost housing, etc because these sectors generate employment when they grow. There could be some relief on personal income tax for middle and low-middle income groups. So, that is also going to give more disposable income to people and then there could be other programmes for rural economy to support them.”

And, what about the ambitious target of doubling farm income by 2022 that was announced last year?

“It is difficult for the government to control the level of farm income because it depends on three factors: output prices, input prices, and the level of output, which is cyclical in nature. Apart from irrigation that can be facilitated, there is not much that the government can do. It can do something about input prices and subsidise those, but I don’t think additional subsidies are on cards. There is Direct Benefit Transfer that can happen for fertiliser subsidies more aggressively. But other than that, I don’t think the government has any control on farm income.”

Meeta Punjabi, MD of Creative Agri Solutions, differs.

“Addressing the issues on the marketing side is critical. Use of ICT-based platforms to ensure fair prices for farmer produce, marketing reforms to improve competitiveness are critical factors for the growth of the agricultural sector. Developing the entire value chain is critical for ensuring the doubling of farmers’ income by 2020.”

“To make a sizeable impact on the stagnant agricultural growth rates, it is important to bring about a systematic change. This calls for new technologies. Use of ICT for precision agriculture, GIS systems, remote sensing, use of robotics for precision agriculture, drones, etc, are going to be widely used for agriculture,” she said.