What the budget can do to support agriculture, in five tables

In 2016, the BJP-led government set a target of doubling farmers’ incomes by 2022. An inter-ministerial committee set up to recommend strategies to achieve this goal highlighted seven sources of income growth , mainly focused on better farming practices and a change to non-agricultural occupations. Over time, the Center has reinforced this with programs targeting the key dimensions of agriculture: income, insurance and loans.

Three of these programs accounted for 82% of central budget allocations to the Ministry of Agriculture and Farmers’ Welfare in 2021-22, up from 18% in 2018-19: the PM-KISAN cash transfer program (Pradhan Mantri Kisan Samman Nidhi), PMFBY (Pradhan Mantri Fasal Bima Yojana), a crop and yield insurance program, and interest rate subsidies on short-term credit to farmers. Between 2018-19 and 2021-22, the combined allocations of the three programs increased 3.3 times, largely thanks to PM-KISAN. Given their importance in the agricultural matrix and their political reach, their primacy in budget support for agriculture is expected to continue when the 2022 budget is presented on February 1.

Data on how these programs have benefited farmers is not available. The latest available estimates of farmer income are for 2018-2019 and indicate stress in agriculture. Between 2012-13 and 2018-19, the average monthly income of agricultural households increased from 6,426 to 10,281 — compound annual growth of 8.2%. The disaggregated data shows that the compound increase in revenue from culture was only 3.5%. This indicates that cultivation is becoming less remunerative for agricultural households and that they are increasingly looking for wage employment elsewhere.

Revenue increase

Announced ahead of the 2019 national elections, PM-KISAN provides a cash transfer of 6,000 per year to about 120 million small and marginal farmers. Its transfer, made in three equal instalments, corresponds to an additional income of around 5% on the last surveyed average of 10,281 in 2018-19. This scheme, which costs the Center approximately 65,000 crore per year, has seen a steady increase in payment disbursements.

In November 2021, there were approximately 124 million farm households eligible for the income transfer from 6,000 per year. These are small marginal landowners who own less than 2 hectares of land and account for about 85% of total land holdings. The list of beneficiaries was drawn up on the basis of the last agricultural census, carried out in 2015-16. In November 2021, the latest round of payments, 109 million farmers, or about 88% of the total number of registered farmers, received the payment.

Crop coverage

Similarly, the PMFBY crop insurance scheme has seen a steady increase in requests for coverage as well as claims. Under the PMFBY, the premium payable by farmers is set at 1.5% of the sum insured for rabi crops and 2% for kharif crops, and 5% for cash crops. The balance bonus is divided equally between the Center and the States.

In 2019-20, 61.3 million crop insurance claims were issued. Of this number, insurance claims were paid for 22.3 million, or about 36% of all claims. However, the PMFBY scheme has been beset by various problems, with farmers complaining about non-payment of indemnities and several states withdrawing due to high premium burdens.

But increased budget spending is unlikely to solve the underlying problems, which are mostly operational. This requires the cooperation of the Centre, States and private insurers, many of which lack operational infrastructure in rural areas.

Research focus

While the above targeted programs are undoubtedly beneficial to farmers, investments in agricultural research and education are also essential to ensure the long-term sustainability of Indian agriculture. This includes spending on services that educate farmers on agricultural best practices (agricultural extension) and research on crop science and climate-resilient agriculture.

Expenses for these are channeled through the Department of Agricultural Research and Education, under the Ministry of Agriculture and Farmers’ Welfare. It also includes spending on agricultural universities and research institutes. However, since 2017-2018, spending on this item has increased by a modest 5.2%, which pales in comparison to the allocation under more populist regimes.

For now, the focus of the EU budget on agriculture remains through the prism of central sectoral schemes. In next month’s budget, this should continue.

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About Keneth T. Graves

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