Agriculture

2017 Budget Takes the Right Steps on Agriculture: Ashok Gulati

While the planned expenditure on irrigation is commendable, Gulati told The Wire, the major disappointment was the lack of talk on direct benefit transfers.

Representation image. Credit: PTI

Representational image. Credit: PTI

As the government says that it is increasing agriculture subsidies and that its 2017 Budget will better the lives of those who are poorest and most vulnerable, particularly in the country’s rural areas, The Wire spoke to Ashok Gulati, chair professor for agriculture at ICRIER.

The government this year has stuck to its promise from last year, that of doubling farmers’ income in five years. After last year’s Budget, you had said these claims were not supported by the government’s planned expenditure. Finance minister Arun Jaitley said the budgeted expenditure on agriculture and allied service has gone up by 24%, do you see a change in this year’s Budget?

The claims on doubling farm income are dubious, because what is the base they are using? Is it nominal terms or real terms?

But that apart, what is important to look at is how they are allocating resources. What I see is that there is a reasonably good amount of money they are trying to put in water resources and irrigation. Rs 20,000 crore is the fund that NABARD is supposed to mobilise for major and medium irrigation schemes, new micro-irrigation scheme has also been announced and given Rs 5,000 crore. In addition to that there is Pradhan Mantri Krishi Sinchai Yojana, which has been allotted Rs 7,100 crore. So all this is about Rs 32,000 crore. So water seems to be getting their attention, which is a good thing.

The only thing that needs to be ensured [with] this money, when it is spent, [is that] there is a transparent mechanism to monitor what is the result of the investment. Otherwise major and medium irrigation schemes are notorious; the money disappears like water disappears in sand.

The second thing is that I think there is an interest subsidy on credit, which is Rs 15,000 crore. That has some leakages, because people take loans at 4% or 7% interest from the bank and then deposit it in the same bank to receive an interest of about 6-8%, though the money goes for agricultural uses.

Ashok Gulati. Credit: SmartIndianAgriculture

Ashok Gulati. Credit: SmartIndianAgriculture

Then there is Rs 9,000 crore that has been budgeted for crop insurance, which will probably fall short. The way that crop insurance has taken off after last year’s announcement , this will not be enough. They had budgeted only Rs 5,500 crore last year, finally they ended up at about Rs 13,500 crore. This year’s Rs 9,000 crore will definitely fall short, in my opinion it will go to Rs 13,000-14,000 crore. So they will have to give that out.

Most of the schemes this year are in the right direction. There is a corpus with NABARD for milk processing of Rs 8,000 crore, with Rs 2,000 crore to start with. They can start some processing plants, either in the private sector or in the cooperative. They have also given some money to upgrade mandis and link them to stock markets, such as with e-NAM. These are all steps in the right direction. Pradhan Mantri Grameen Sadak Yojana is also in the right direction, it’s got Rs 19,000 crore.

The disappointment, though, is in where the most money is going – for food and agricultural subsidies. That’s where inefficiency in leakages are, but there has been no word on what to do on that in the Budget. They have been having long discussions on universal basic income and so on, but at least first they should turn this into a direct benefit transfer! Leakages in food subsidies are close to 40%. You need to rationalise that and move towards DBTs, and put the money directly into the account of beneficiaries. They’re not moving in that direction at all – that’s where the timidity is. Other than that, there is nothing negative.

How would you say this compares to last year’s Budget?

Compared to last year’s Budget, I think this is a little better. I think putting Rs 20,000 crore last year and then again Rs 20,000 crore this year to build a corpus for irrigation, and then Rs 5,000 crore again for micro irrigation, these are good steps. Water is so important, we have to get drought proofing for our rural economy. Otherwise with another drought everything will be shaken. But I was expecting that the game changer would be that the Centre pushes at least Rs 50,000 crore in water. That money can come from the rationalisation of food and fertiliser subsidies, there would be enough savings.