Budget Fails Yet Again to Present a Roadmap to Increase Rural Demand, Double Farmers' Income

The focus had to be on providing a fillip to rural incomes as the current slowdown began in rural India and deteriorated after demonetisation.

New Delhi: While the broad consensus among economists was that the government needed to focus on putting money in the hands of those who are at the bottom of the pyramid, the 2020-21 budget has stayed away from making any such commitments.

The focus, in particular, had to be on providing a fillip to rural incomes as the current slowdown began in rural India, with rural wage growth showing a declining trend since 2014, and got particularly severe after demonetisation.

This is crucial too as the government has set itself the ambitious target of doubling farmers’ incomes by 2022 with 2015 as the reference year. But, even the first full budget of NDA 2 in July 2019, did not outline how this was going to be achieved.

The headline allocation for the rural sector in the 2020-21 budget is Rs 2.83 lakh crores, which is only 5.5% higher than the allocation last year and is barely able to keep up with inflation.

The two key schemes in place to provide income support to rural Indians are the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the PM Kisan Saman Nidhi (PM Kisan).

Allocation for MGNREGA has been increased by only 2.5% to Rs 61,500 crore while the revised estimate – what the government estimates it will spend by March 2020 – for 2019-20 is Rs 71,000 crore. So, effectively, finance minister Nirmala Sitharaman’s budget has allocated less than what it expects to spend this year.

The finance minister has done the opposite under PM Kisan. In 2019-20, the government expected to spend Rs 54,000 crore till March 2020 against an allocation of Rs 75,000 crore. However, it has again allocated Rs 75,000 crore under the income support scheme.

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As The Wire has pointed out earlier, the scheme has stuttered in the last year and has been only been able to achieve only about 50% of its targets. The budget speech made no mention of addressing the issues which are plaguing the scheme.

“This budget is an opportunity missed. It could have addressed the economic slowdown by providing a roadmap for putting money in the hands of people. But, it hasn’t done that,” said noted agriculture and food policy expert Devinder Sharma.

The 16-point action plan that Sitharaman did announce for the agriculture sector is unlikely to result in any significant increased income in the near future. The plan talks about increasing agricultural credit, increasing food and fisheries production, eliminating foot and mouth disease, incentivising zero budget farming, improving transport facilities for perishable commodities.

Nirmala Sitharaman presents the Union Budget 2020-21 in the Lok Sabha, in New Delhi, Saturday, Feb. 1, 2020. Photo: PTI

While efforts to provide better linkages to the market, such as Kisan udan and Kisan rail, could aid farmers’ incomes from perishable commodities, none of these are likely to raise farm incomes in the short run.

“The 16-point wish list will be a good roadmap for the sector in FY 2021,” said former agriculture secretary Siraj Hussain. But, Hussain said that the wish list was difficult to implement in the short run.

Another farm-based scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY), which the government had focussed on in the previous years failed to get much attention this time in the budget speech.

The allocation for PMFBY has increased by Rs 1,695 crore to Rs 15,695 crore. But, again, the government has not addressed the issues which ail the scheme. As The Wire has reported, the scheme is of limited benefit to farmers as the claim payments are delayed by months.

PM-Aasha which sought to compensate farmers when they sold their produce at less than MSP has seen a one-third cut in budget allocation, from Rs 1,500 crore last year to Rs 500 crore this year. To put this in perspective, the government estimates that it will spend Rs 4,000 crore on the National Population Register (NPR) exercise.

Also read: Sitharaman’s ‘Budget of Giveaways’ Will Not Help India’s Broken Economy

The cut would have been understandable had market prices been at par with MSPs. But, that has not been the case. The market prices have been consistently lower than MSPs for most crops except for wheat and rice.

“The FM had little elbow room this year. With nominal growth at just about 7.5% and tax collection not likely to meet targets, increase in allocation for agriculture was not expected,” said Hussain.

Given the limited elbow room and the tax revenue shortfall due cut in corporate taxes, GST shortfalls and reduced personal income tax collection due to the slowdown, the government has reduced its allocation for food subsidy by a massive almost Rs 70,000 crore.

“It was last year’s allocation of Rs 1.84 lakh crore that was the outlier. So, now they have gone back to what is the average spend,” said economist Abhijit Sen, a former member of the Planning Commission.