Policymakers Should Realise That The Pathway To Viksit Bharat Has To Pass Through Agriculture

Given a growing farming population, already witnessing a reverse migration with 68 million workers returning back to villages in the past five years, budgetary allocations cannot leave them behind. There has to be a rethink on this critical issue

As the country’s GDP growth declines to a low of 5.4 per cent, and with the stock market also faced with a crash, all eyes are on the Union Finance Minister Nirmala Sitharaman as she gets ready to present the first full-year Union Budget on February 1.

As the expectations run high, I am reminded of what former Finance minister Arun Jaitley had said when he presented his maiden budget eleven years ago, in 2014. He had listed five priority areas, on top of which was farmer’s income. Eleven years later, while many new programmes and pilot projects have been launched with the underlying promise of raising farm income, the fact remains that farmer’s income continues to remain at the bottom of the pyramid.

In 2016, Jaitley made a commitment to double farmers’ income in another five years; on a TV Channel I was asked as to what really was the a farmer’s income then.

In my response I quoted the Economic Survey that was placed in Parliament two days before the budget. It said that the average farm income in 17 states, which meant roughly half the country, was Rs. 20,000 a year. In short, farmers in half the country were living on a miserly monthly income of Rs. 1,700. As the risk of sounding repetitive, this pathetic farm income level was a reflection of how valueless faming had become over the years.

Nevertheless, at a time when consumption is low, it is futile to put in precious resources on jacking up the supply side. This is exactly what happened when the rural demand in particular was low; the Finance Minister had announced a tax concession of Rs. 1.45-lakh crore in September 2019 aimed essentially at propping up industrial production. The need was to build on rural demand but the corporate tax cut actually helped the industries to raise profits. No wonder, corporate profits have soared by four times in the last four years. With the wages remaining stagnant, not even covering the rate of inflation, corporates walked away with their pockets full. Reports show that Nifty 500 companies clocked a record profit of Rs. 14.1-lakh crore in FY24.

As expected, the rural demand remained low. It is only lately that some statistics show a slight increase in rural consumption as measured through FMCG sales, but that may not be true reflection. After all, with 81 per cent of the rural population getting five kg wheat/rice supplies free every month, which actually is an incentive for growth and not a subsidy as corporate economists will like us to believe, have helped shift the food needs of the poor from cereals to nutritious foods like fruits, vegetables and milk.

This I think is a healthy shift and there can be no denying that free ration came in as an incentive for growth. For the poor, shifting to healthy and nutritious foods should be seen as a sign of growth.

As the Nabard second All-India Rural Financial Income Survey 2021-22, presented last October, show a jump of 57 per cent in rural household income over a period of five years, between 2016-17 and 2021-22, rising to Rs 12,698, let us not be swayed by the percentage increase in income. Against the average nominal GDP growth in the same period (on financial year basis) being nine per cent, the rise in income indicates a nominal compound annual growth rate (GVA) of 9.5 per cent.

While economists have a knack of presenting statistics in a manner that it may hide the ground realities, the reality is that the household incomes are still very low. As far as agriculture is concerned, farm households are earning a little higher at Rs. 13,661 per month, compared to Rs. 11,438 for non-farming households.

Although the sample size of Nabard survey is quite low when compared with the Situation Assessment Surveys, the last Situation Assessment Survey for agricultural households that was done in 2019, showed the average monthly farm income to be at Rs. 10,218. The little rise that we see in average monthly farm income (from the two surveys) therefore should not lead to any misconceptions. As I had said earlier, farm incomes continue to remain at the bottom.

In any case, as per the 2024 National Accounts Statistics, household savings are on a decline. This is based for both the urban and rural sectors.

Now coming back to what Jaitley had proposed, which remains largely unfulfilled, the first and foremost task should be to make serious attempts at completing the challenge that was thrown in 2014. It relates to the majority population which is in dire need of income enhancing measures. Putting in money for digital infrastructure, precision farming and robotics will end up throwing in resources for the corporates but if past experience is any indication such measures have failed to raise farm incomes.

If farm incomes improve, rural demand will increase and in turn rural consumption will also rise. This will have a resounding impact on the national economy. Instead of simply looking at ways to enhance consumption, Sitharaman would therefore do well by taking the bull by the horn, which means making direct attempts at increasing farm income.

It is here that I draw attention to the recommendations of Parliament’s Standing Advisory Committee on Agriculture, headed by former Punjab Chief Minister Charanjit Singh Channi, whose suggestions include doubling the PM-Kisan entitlement from the existing Rs. 6,000 to Rs 12,000 per year, and providing a legal guarantee for Minimum Support Price (MSP). These two initiatives will surely form the kind of agricultural reforms that the farming community and the country are looking forward to.

The second step should be to substantially increase the agricultural budget. When I say substantially, I don’t mean by 15 per cent as some newspaper reports are predicting. In that way, raising the agricultural budget from the existing Rs. 1.52-lakh crore to Rs 1.75-lakh crore will not make any appreciable dent. What is required is the commitment to increase the budget for agriculture by Rs. five lakh crore every year to ensure a share of 50 per cent of the total budget in the next five years.

After all, given a growing farming population, already witnessing a reverse migration with 68 million workers returning back to villages in the past five years, budgetary allocations cannot leave the farming populations behind. There has to be a rethink on this critical issue.

The pathway to Viksit Bharat definitely passes through agriculture. The sooner we realise this, the better it will be for an all-round growth of the Indian economy.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)