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What agriculture sector requires is higher budgetary allocation, not increased subsidies

This year’s budget is expected to focus on the need to remove bottlenecks in production and distribution of food products as well as pave the way for cashless transactions in the sector. The expectations of people-friendly reforms by the government have increased even further post the announcements of demonetisation and GST implementation.

Budget this year is expected to have higher allocations to agriculture as well as a higher agriculture credit target. It is expected that low interest loans, subsidies, etc., could be included in the budget to shift the focus of farmers towards high-value agricultural products and away from the traditional rice-wheat cropping systems. Interest subvention schemes would be continued with a higher budgetary allocation.

To offset the demonetisation effect, the government may announce certain new schemes and increase allocations to popular ones. There may be incentives or schemes announced for increasing the farm land coverage by redevelopment of barren lots. Budgetary allocations for promoting drip irrigation may also be increased and schemes such as the ‘Pradhan Mantri Krishi Sinchai Yojana’ may see increased focus. Overall, the target for crop irrigation may be increased and projects under Accelerated Irrigation Benefits Programme (AIBP) may see increased allocations.

Representational image. Reuters

Representational image. Reuters

In areas such as organic farming, the Budget may see greater allocations as well as an increase in the ambit of the programme from the current 10,000 clusters. The soil health programme may also see greater focus in terms of coverage area increase and incentives.

Further, initiatives to provide greater access to cashless transactions are also expected to be introduced in the upcoming budget session. This could help farmers purchase seeds, fertilisers, other agricultural inputs and essentials with more convenience. The move towards the Direct Benefit Transfer may see increased budgetary focus this year with respect to direct transfer of fertilizer subsidies.

A boost to using technology across the value chain of the farm cycle is expected. This may include using technology and IT systems to adopt high-yield and resistant seed varieties, utilise water for irrigation efficiently, and adopt modern farming practices (crop rotation, phase sowing, drip irrigation, harvesting, etc.). Similarly, software and mobile applications to link farmers with consumers could get a push from the government. This would form a sub-task of the broader objective of implementing the National Agriculture Market more efficiently.

Animal welfare may see higher allocations and new schemes especially in the areas of animal husbandry, cattle and livestock breeding. There could be greater allocation and focus on the four animal welfare schemes announced last year namely, ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘e-Pashudhan Haat’.

Market access may see greater focus this year in the budget with emphasis on the Unified Agriculture Marketing Scheme and amendments to the APMC Acts of the states. Overall, the budget this year, is broadly expected to concentrate on increasing budgetary allocations for agri-development and not increasing the deficit by doling out increased subsidies.

(The authors are Head - Consumer Markets and Associate Director - Consumer Markets, KPMG in India)

For full coverage of Union Budget 2017 click here


Updated Date: Jan 17, 2017 15:49 PM

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