In Economic Survey and Budget 2022, Agriculture is the Elephant in the Room

One gets an uncomfortable feeling that the agricultural reforms are on the back burner, at least for the time being.

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The Economic Survey of 2021-22 makes no mention of the enactment of three farm laws, sixteen months long farmers’ agitation and repeal of the laws by the Parliament. Similarly, in the budget speech of the Finance Minister, there is no reference to doubling of farm income, which was to be achieved by 2022-23.

One gets an uncomfortable feeling that the agricultural reforms are on the back burner, at least for the time being. It could well be due to ongoing assembly elections in Uttar Pradesh and Punjab.

The Economic Survey highlighted the importance of crop diversification from water guzzling crops like paddy and sugarcane to cotton, horticulture, nutri-cereals, oilseeds and pulses. The Survey further recommended a thrust on animal husbandry, dairying and fisheries sectors. The Situation Assessment Survey 2021 also found that an agricultural household earned about 16 percent of his income from farming of animals. There is a welcome increase in allocation for the blue revolution.

In her speech, the Finance Minister announced that the use of drones will be promoted for crop assessment, digitization of land records, spraying of insecticides and nutrients. A number of start-ups have been trying to develop such technologies. However, there is no uniform nation level policy for supply of cadastral maps and other information required for developing technologies. In one state, a start-up has been asked to pay Rs 50 lakh for cadastral maps of eight districts.  A supportive policy regime in the budget was expected to incentivise the use of modern technology like remote sensing, drones, mobiles, artificial intelligence etc. in assessment of crop yields, crop losses and most importantly, the estimates of production of crops. Divergence between government and trade estimates has been one of reason for inflation.

The FM has announced that Ken Betwa river linking project will be taken up at an estimated cost of Rs 44,605 crore. This will irrigate 9 lakh hectare of land. The ecological cost of the project is contested by environmentalists and its usefulness to agriculture will be tested over the decades.

Finally, any reference to use of electronic negotiable warehousing receipts (e-NWRs) for formalisation of warehousing based agricultural trade is missing. An amendment to Warehousing (Development and Regulation) Act, 2007 has been under consideration of the Government. A road map to compulsory registration of warehouses may enable the Government to introduce a more predictable regime of future trading of agricultural commodities. This can make price discovery more transparent. The farmers have increased the area under mustard and rapeseed in the current Rabi crop on the expectation of higher prices. In the absence of a futures market, they have taken a calculated risk.

The budget allocation for food subsidy in 2022-23 give an indication that Pradhan Mantri Garib Kalyan Anna Yojana is unlikely to continue. The allocation is down from Rs 2,86,219 crore to 2,06,480 crore. Since procurement of wheat and rice is not likely to come down, the Government seems to have reconciled to carrying excessive stocks in central pool.

The allocation for rural development as a percentage of GDP has declined from 0.60% in the B.E. of 2021-22 to 0.54% in the B.E. of 2022-23. Against the R.E. of Rs 1,53,558 crore for the current year, budget provision for the next year has been slashed to Rs.1,35,944 crore.  Outlay on MGNREGA, the largest rural employment scheme, has been pegged at Rs.73,000 crore although the R.E. for the current year is Rs 98,000 crore. This is somewhat surprising since the Economic Survey actually provided evidence that demand for work under the scheme, even during the current year, continues to be higher than the pre Covid-19 pandemic level of 2019-20. Inadequate provision for the scheme in effect leads to demand suppression at the ground level and also periodic delay in wage payments to the unskilled labourers working to secure their subsistence.

It is heartening that the allocation for the rural road programme (PM Gramin Sadak Yojana) has been substantially hiked from Rs14,000 crore in the current year to Rs.19,000 crore in 2022-23.

The allocation for the Department of Fertilisers has been reduced from Rs 1,49,663.28 crore to Rs.1,09242.23 crore. The Government is expecting the global prices of urea to cool down. Since we have substantial import dependence both for urea and DAP and the international prices of these fertilisers continue to be high, substantial reduction in the subsidy does not appear to be highly probable. Here again the allocation might require supplementary grant in course of 2022-23.

One welcome announcement is the enhancement in allocation for formalization of micro food processing enterprises from Rs 399 crores this year to Rs 900 crores next year.

Disappointingly, even the much needed hike in the social security pension for the elderly poor, widows and differently abled persons has not been provided.

On the whole, the budget 2022-23 is not likely to make much impact on agriculture and rural development sectors.

Siraj Hussain is Visiting Senior Fellow ICRIER. He is a former Union Agriculture Secretary. Mohapatra was Union Fertiliser and Rural Development Secretary.