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Last Updated : Jul 04, 2019 12:20 PM IST | Source: Moneycontrol.com

Budget Snapshots | Agriculture will be the flavour of the season

Ruchi Agrawal @ruchiagrawal

Highlights

  • Agri reforms to be at the centre of the upcoming Budget

  • Govt may offer farmer support through easy credit availability

  • Allocations expected for crop procurement and irrigation

  • Uptick in rural income a positive for agri companies


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With mounting expectations of strong reforms in the upcoming Budget, we look at various areas that are most likely to be recipients of grants and companies which are poised to benefit.

The budgetary exercise is the first one after the massive win of the NDA in the just-finished elections, which in a way is crucial to define the growth trajectory in the coming five years.

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Current allocations at a glance

Budget1

In 2019, arresting the dwindling GDP growth, addressing the agrarian distress and fixing the financial sector woes have emerged as key challenges.

The Budget will be a tussle between ability and willingness to spend. With the target of doubling farm income amid its sluggish growth, agriculture and allied services are expected to be the core focus. The government’s fiscal position will determine its ability to spend.

farm1

Rural credit and support to farmers

Farmer issues have been at the centre of election campaigns. Easy and interest free availability of credit to small and marginal farmers through the governments kisan credit card schemes is expected.

Promotion of irrigation facilities

Farmers in most Indian states are dependent on the monsoon, which brings in increased vulnerability. The fact is unexpected monsoon performance is one major cause of farm distress. We expect to see allocations to encourage deeper penetration of irrigation practices in order to reduce this dependence.

Crop procurement 

Post the much-talked about increase in the MSP (minimum support price) and the overall failure in the implementation of the prices, we expect the government to allocate resources towards creating incentives for improving crop procurement.

Agri warehousing and development of nation-wide market

Unavailability of proper storage facilities has been crippling farmers even after so much toil in the field and bumper harvests. It has been much discussed over the past weeks and the Budget is expected to push reforms in rural warehousing and cold storages, along with logistics in rural areas, with a view to enhancing farmers' reach. With the low margin nature of rural warehousing, we expect the Budget to offer incentives and subsidies to warehouses and cold storages.

We also expect allocations to promoting reforms beyond e-Nam and removal of the middlemen in agri markets. Policies and incentives for converging the supply chain from farmer to retailer and consumer is expected to be rolled out.

Crop insurance

Farmer distress owing to damaged crops has been a major roadblock in rural development over the years. Crop insurance is one solution to ensure protection against untimely weather plights. Keeping this in mind, we believe that the Budget will provide for subsidy for agri insurance companies to ensure insurance penetration in Rural India.

Outlook

The markets have been volatile in the current pre-Budget phase. We expect major agri chemicals, fertiliser, micro irrigation, crop insurance, food processing and rural logistics to be direct beneficiaries from the allocation of the Budget 2019-20.

Follow @Ruchiagrawal

For more research articles, visit our Moneycontrol Research Page

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First Published on Jul 3, 2019 10:37 am
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