Agricultural sector in India

Source: The post about the agricultural sector in India has been created, based on the article “Ignoring an agricultural sector in distress” published in “The Hindu” and the article “Ashok Gulati and Purvi Thangaraj write: The Interim Budget 2024 neglects the farm sector” published in “Indian Express” on 2nd February 2024.

UPSC Syllabus Topic: GS Paper3-Indian economy- Government Budgeting.

News: This article discusses how the government’s financial plans and budget for 2024-25 seem more focused on showing the government in a positive light, rather than addressing the ongoing problems in agriculture.

What are the special provisions for the agricultural sector in the Budget for 2025?

Growth in Agriculture GDP: Agriculture GDP in 2023-24 showed a modest growth of 1.8%, a decrease from 4% in the previous year.

Budget Allocations for Agriculture Departments:

The Department of Agriculture and Farmers Welfare saw a slight increase of 0.6%.

The Department of Agricultural Research and Education received Rs 99.4 billion, a marginal increase of 0.7% over the previous year.

Ministry of Fisheries, Animal Husbandry, and Dairying: Experienced a significant budget increase of 27%.

Overall Budget Support for Agri-food Sector:

Includes PM-KISAN, credit subsidy, and PM-Fasal Bhima Yojana, totaling Rs 5.52 trillion for FY25, slightly less than Rs 5.8 trillion in FY24.

Food and Fertilizer Subsidies:

Food subsidy reduced to Rs 2.05 trillion in FY25, a drop of 3.3% from FY24.

Fertilizer subsidies decreased from Rs 1.89 trillion in FY24 to Rs 1.64 trillion in FY25.

What does the official data show about the agricultural sector in India?

Decline in Agricultural Prices: Official data indicates a significant decline in agricultural prices, causing a reduction in farmers’ incomes. The sectoral deflator in agriculture decreased from 9.4 in 2013-14 to 3.7 in 2023-24.

Slowed Growth of MSP: The growth of Minimum Support Prices (MSP) for major crops slowed down considerably, from an 8-9% annual increase between 2003-04 and 2012-13 to about 5% between 2013-14 and 2023-24.

Drop in Farmers’ Incomes: Despite a promise to double farmers’ real incomes from 2015 to 2022, incomes from cultivation actually fell by about 1.4% between 2012-13 and 2018-19.

Rising Rural Unemployment: Rural unemployment rates increased, with a notable rise from 2011-12 to 2018-19, and remained 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 increase. Much of the long-term bank credit meant for agriculture was diverted to corporates and agri-business firms as short-term loans.

What are the issues with the government’s report on the agricultural sector in India?

Selective Data Presentation: The government’s report emphasizes the increase in agricultural production but neglects the overall decline in growth rates. For example, 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 in the same periods.

Budget Cuts in Agriculture: The 2024-25 budget plans to reduce spending in crucial agricultural areas, such as fertilizer subsidies (from ₹1.9 lakh crore to ₹1.6 lakh crore) and rural infrastructure projects.

No Clear Strategy for Growth: 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: The PM-Kisan scheme’s allocations remain the same as in 2019, not accounting for inflation, which reduces the real value of cash transfers to farmers.

What should be done?

Rationalize Food Subsidy: Implement rationalization of the food subsidy system, similar to the strategy used by former PM Atal Bihari Vajpayee in the Targeted Public Distribution System (TPDS). This could save around Rs 50,000 crore.

Redirect Subsidy Savings: Use the funds saved from food subsidy rationalization for enhancing agricultural research and development, particularly in areas like micro-irrigation.

Reform Fertilizer Subsidies: Shift from subsidizing the price of urea to direct cash transfers to farmers. This approach is expected to save Rs 30,000-40,000 crore, which can be reinvested in agricultural development programs like PM-KISAN.

Focus on Sustainable Agriculture: Allocate the saved funds towards sustainable agriculture practices, which is crucial for ensuring food security under the challenges of climate change.

Question for practice:

Examine the issues and recommendations concerning the Indian government’s agricultural sector policies in the 2024-25 budget.