2016: Can this budget keep up the promises for famrers?

‘Doubling the farmers’ incomes in the next five years’ is the promise with which the Finance Minister Mr. Arun Jaitley began his 2016-17 budget speech.  What does this means to 263 million people (who form 54.6% of working population) deriving their livelihood from farming today?  The increasing costs of cultivation and stagnant prices (when corrected to inflation), increased costs of living and decreasing over all support to farming has led to continuous decline of farm incomes.  The National Sample Survey 70th round (2014) estimates that average income of farmers is Rs 6,426 per month which is often lower than their monthly expenditure.  Let’s see what the current budget offers to the farmers.

160301 budget dc

Total allocation for farming sector is increased to Rs. 35,984 crore a substantial increase from the previous year. The main focus of the budget seems is to be creating infrastructural support in the form of creating irrigation facilities, storage and processing facilities and establishing unified market system which together will lead to the increase in the incomes for the farmers.

The growing indebtedness in agriculture is due to low access to institutional credit.  The budget targets Rs. 9.0 lakh cr to farm sector with an interest subvention of Rs. 15,000 cr.   This will only marginally increase the credit access from the current 21%.  The allocation of Rs. 5,500 cr to the new Pradhan Mantri Fasal Bheema Yojana is a silver lining which may help more farmers to get under the cover.

The substantial allocations in the budgets for irrigation and ground water management under various schemes will help farmers in rainfed areas to protect their crops and reduce the risks of crop failure.

However, the key question about the strategies to increase the farmers’ incomes remains unanswered.  As promised, if the incomes have to double in the next 5 years, the annual growth rate has to be at least 14%.  This seems to be an impossible task given that the increase in minimum support prices across the commodities in the last two years is only 3-6%.  In this budget also no efforts are made to increase the prices. Promoting decentralised procurement can get more farmers to access the minimum support prices.  Creating a unified market without creating safety nets will only make the farmers vulnerable given the high variations in costs of cultivation and access to productive resources like land and water across the country.

The allocation of Rs. 900 crore for price stabilisation fund is a welcome step, but these allocations are often used to stabilise the prices at the consumer end rather than on the producer end as it happend in the last two years.

The key challenges in farming sector cannot be addressed as long as the farmers remain unorganised.  Substantial investments have to be put in by the governments to organise farmers into producer organisations and extend credit, infrastrure supports and tax benefits to them. Currently, these organisations are taxed at 30% like any other companies with no incentives on loans for working or fixed capital.

Even if we assume that the current trend will continue and somehow farmers’ incomes will double in the next five years, it will remain at about Rs. 12,000 per month on average in 2022 which will be half of the income of the lowest paid employee in government this year and that will be delivered by the next government.  No hope on horizon for farmers as yet.