Budget 2024: Fingers crossed for agri sector after El Nino troubles

Growth in gross value added of the agricultural sector is estimated to fall to an eight-year low of 1.8 percent on 2023-24.

The agriculture sector stood strong during the coronavirus pandemic, growing by 5.1 percent on average in 2019-20 and 2020-21. If not for the farm sector, the economy would have contracted by far more than the average 1 percent in each of the two aforementioned years.

However, it has been a tough 2023-24 for farmers, with the statistics ministry estimating that the sector's growth rate this year is set to be at an eight-year low of 1.8 percent.

Also Read: Direct cash transfers a hit but farm infrastructure still a miss

"Exacerbating the anticipated downside in 2023 Kharif production, Rabi sowing has lost pace in recent weeks with area sown under pulses lagging by 5.1 percent. In addition, El Nino as a global phenomenon continuing into 2024 could spell some downside for the Rabi crop in the face of warmer temperatures over January-March 2024 and April-June 2024," economists from QuantEco Research said.

"Having said so, anticipated end to El Nino in 2024-25 and high possibility of normal Southwest monsoon in 2024 should prove supportive for agriculture output," they added.

Solid growth of the agricultural sector is crucial for the Indian economy. The sector accounts for around 15 percent of the Indian economy and an even larger percentage of workers. Poor production or can also fuel food inflation, as India witnessed in mid-2023. As such, both rural and urban India are heavily dependent on how the farm sector holds up.

While major announcements are usually not expected in an interim budget, it would not be surprising to see the farming community being the focus ahead of the Lok Sabha elections. Speculation is already rife that the central government is considering raising its annual cash transfer under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme to Rs 8,000 from Rs 6,000.

But what the agriculture sector really needs is long-term vision.

"The vulnerability of the economy to recurring vegetable price shocks, especially ahead of and during the monsoon, warrants major reforms in perishable supply chains," economists from the Reserve Bank of India said in August 2023. With climate-related events impacting agricultural output severely, it would be a surprise if the upcoming budget does not act on this front.