Centre's Allocation to Rural Economy Paints a Nuanced Picture of its Commitment

While the government is not diluting its focus on agriculture and rural development, some operational problems could surface with such a pattern of allocations.

Budget 2021 has been profusely welcomed by pink media, stock market and most “expert” commentators.

The move towards transparency of budget figures is arguably one of the most significant achievements of this year’s budget. By acknowledging that fiscal deficit in revised estimates (RE) 2020-21 will be 9.5% of GDP rather than 3.5% in the budget estimates (BE), the Centre has brought much needed credibility to the figures of fiscal deficit. If the deficit can be contained to 6.8% in 2021-22, the Centre can claim even more credit for the robustness of the budget’s estimates and projections.

Compared to RE of 2020-21, the allocation in BE 2021-22 is lower for MGNREGS, Pradhan Mantri Awas Yojana-Gramin (PMAY-G) and National Social Assistance Programme (NSAP).

The overall allocation for rural development has been downsized from Rs 2,16,342 crore to Rs 1,94,633 crore. For PM Kisan, the allocation for next year is Rs 65,000 crore, same as in RE 2020-21. Does it mean that the Centre is diluting its focus on agriculture and rural development?

Our answer is no.

MGNREGS is a demand driven scheme and depending on the requirement of work in rural areas, the state governments are mandated to provide up to 100 days of employment. Now that the economy is recovering  from the shock of COVID-19 pandemic, the workers are likely to move back to urban and industrial centres and this should reduce demand for employment in MGNREGS.

Also read: What Not to Expect for Agriculture in Budget 2021

So reduced allocation in BE of next year may not really mean that the Centre is withdrawing from the same. If demand for work remains strong, in all probability, Centre would provide supplementary allocation, as in the previous years. However, if the reduced budget allocation gets exhausted during the year, it does trigger operational problems as wages remain unpaid beyond the legally mandated period.

However, if the reduced budget allocation gets exhausted during the year, it does trigger operational problems as wages remain unpaid beyond the legally mandated period. Photo: File

PMAY(G) is a flagship programme, under the mission “housing for all”, targeted to provide 2.95 crore houses to the deprived rural households during 2016-17 and 2021-22. According to the latest estimate 1.30 crore houses have been completed so far under PMAY(G). If the target milestone is to be met as originally scheduled, inevitably higher allocation has to be provided in course of the year.

However, the huge reduction in allocation for NSAP – from Rs 42,617 crore (FY’21 RE) to Rs. 9,200 crore (FY’22 BE) is unlikely to be supplemented in course of the year. Given the fact that the spillover effects of the pandemic on the vulnerable rural livelihoods have still not fully abated, the enhanced level of social assistance for the destitute senior citizens and widows should have continued for at least six more months.

There is a slight reduction in interest subsidy on short-term credit to farmers. In the backward regions of eastern India, from Bihar to North Eastern states, the coverage under Kisan Credit Cards is extremely poor.

Even if the overall allocation of Rs 19,468.31 crore is Rs 363.44 crore lower than in RE of 2020-21, the main thrust of the Centre should be on substantially increasing the coverage of short-term loans on Kisan Credit Cards in eastern states of India.

If the medium-term vision is to reduce the cultivation of paddy in north west Indian states of Punjab, Haryana and western Uttar Pradesh, the productivity of eastern region, having higher rainfall and being more suitable for paddy cultivation, has to be increased.

A farmer gathers saplings to be planted at a paddy field in a village in Nagaon district, in Assam, July 3, 2018. Picture taken July 3, 2018. Photo: Reuters/Anuwar Hazarika/Files

In 2010-11, the Centre had launched the ‘Bringing Green Revolution to Eastern India’ (BGREI) initiative to realise the potential for higher rice production in Assam, Bihar, Chhattisgarh, Jharkhand, Odisha, eastern Uttar Pradesh and West Bengal. In the last ten years, the programme has been quite successful and Odisha and Chhattisgarh have emerged as prominent rice procuring states. A thrust on higher coverage of farmers for crop loans in these states is therefore required to realise their  potential to increase yield of paddy. This is necessary to fill up the gap expected from reduced production of rice in Punjab, Haryana and west Uttar Pradesh.

The allocation under PM Kisan has been reduced from Rs 75,000 crore in BE to Rs 65,000 crore in RE 2020-21.

The Agriculture Census conducted in 2015-16 found 14.5 crore operational holdings. For PM Kisan, the eligibility is based on real data of land records. So, it can be safely assumed that compared to census data based on NSSO surveys, it is more accurate. Last instalment of PM Kisan was disbursed to 9.42 crore land holders who were found eligible.

Also read: Budget 2021: The Winners, Losers and the Largely Unaffected

Since West Bengal had not participated in the scheme initially, PM Kisan may be missing a maximum of 72 lakh landholders.

So, reduction in allocation under PM Kisan does not mean that the Centre is withdrawing from its commitment. Rather, it reflects the correct position of landholders identified by state governments and found eligible to receive three instalments of Rs 2000 each, in a year. In Tamil Nadu, a large number of ineligible beneficiaries seem to have received instalment of PM Kisan and the matter is under investigation. So, the allocation of Rs 65,000 crore in BE for 2021-22 may not be understated.

Water, a black mark

The increase in allocation under Pradhan Mantri Krishi Sinchai Yojana from Rs 2,563.20 crore in RE of 2020-21 to Rs 4,000 crore in BE 2021-22 is however not in tune with the water crisis India is facing in several regions.

There is large unmet demand for micro-irrigation in several states (like Maharashtra, Gujarat, Karnataka, Tamil Nadu) but the budget speech of the finance minister and the allocation for per drop in the budget does not reflect the urgency the water crisis deserves. In fact climate change did not find a mention in the budget speech.

Greater water scarcity means more and more farmers will turn to waste water for irrigation. Credit: Reuters

The reduced allocations under Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM Aasha) and Market Intervention Scheme-Price Support Scheme (MIS-PSS) does not mean that the Centre will reduce the MSP procurement of oilseeds and pulses.

In view of global upturn in commodity prices, the Centre may be expecting that the domestic prices will rule above MSP. We think that if the prices fall below MSP and the state governments submit proposals for procuring up to 25% of their production, the Centre will not refuse and it will increase the allocation at RE stage.

In case of cotton procurement, the BE of 2020-21 was only a token allocation of Rs 0.01 crore but the market prices ruled below MSP for much of 2020-21 and the budget now provides Rs 865 crores in RE. For next year the BE provides Rs 136 crore, on the expectation of rising prices of cotton in the global market.

If there is one worrisome aspect in the budget, it is the proposal to levy Agriculture Infrastructure and Development Cess on several items, including some agricultural commodities. It is estimated that the Centre will collect Rs 30,000  crore on this account and it will not be shared with the states. However, the BE for 2021-22 shows an allocation of just Rs 900 crore for Agriculture Infrastructure Fund.

This decision may further drive a wedge between the Centre and the States and dampen the spirit of cooperative federalism.

Siraj Hussain is Visiting Senior Fellow, ICRIER. Jugal Mohapatra was Union Secretary, Rural Development.