Elected with a massive mandate, the Modi 2.0 government was expected to focus on fiscal consolidation as it is no secret that real fiscal deficit in FY19 was understated and was higher than 3.4 percent of GDP.
However, the first decision of the government was to expand the coverage of PM-Kisan. Announced in the interim Budget on the eve of the Lok Sabha elections, PM-Kisan sought to cover small and marginal farmers (SMF), owning up to 5 acres of land. The interim budget provided Rs 75,000 for this direct benefit transfer into bank accounts of SMF. The government estimates that expansion of PM-Kisan will cover an additional 5 crore farmers, taking total beneficiaries to 14.5 crore farmers. It is now estimated to cost Rs 87,000 crore.
The actual number of farmers in the country is not known and the estimate of 14.5 crore comes from the Agriculture Census of 2016. This number is not based on land records. During the implementation of PM-Kisan, Punjab found that it has 11.16 lakh SMF while the Census estimate talked of 3.61 lakh. So, we may find that Rs 87,000 crore is not enough for all farmers across India.
According to All India Rural Financial Survey 2016-17, there was wide variation in the average monthly income of agricultural households across states. Let us take Punjab. An agricultural household earned only Rs 6,668 per month in UP while the average monthly income in Punjab stood at Rs 23,133. Farmers owning more than 5 acres would be earning more than this amount in Punjab. PM-Kisan will now provide Rs 500 per month to them as well.
About 98 percent of gross cropped area in Punjab is irrigated and procurement system is so robust that whatever quantity of wheat or paddy is brought by farmers to the mandi is procured by government agencies. The entire ecosystem of Aadhaar linked bank accounts was created to enable the targeted transfer of subsidies. If the government had to allocate more money to PM Kisan, it would have been better if the assistance to small and marginal farmers in unirrigated areas was increased from Rs 500 per month.
The fiscal space for the government is constrained. In the interim Budget, the estimated increase in revenue is 18 percent for GST, 32 percent in personal income tax and 15 percent in corporate tax. The economic slowdown will make these targets even more challenging. With higher MSPs and bulging procurement, food subsidy bill may also rise in FY20.
Outstanding debt of Food Corporation of India (FCI) from the National Small Savings Fund is estimated to be Rs 1.81 lakh crore. In FY19, according to revised estimate, FCI was to get Rs 1.4 lakh crore from the government, but it received only Rs 80,000 crore. Sooner than later, the food subsidy will have to be fully paid from the budget. There are several other instances of government expenditure in various sectors through National Housing Board, Nabard and Rural Electrification Corporation not being reflected in the budget.
If the government was confident of meeting revenue targets, a better beginning would have been to announce a substantially large investment in agri-rural sector for which the BJP manifesto has committed Rs 25 lakh crore over five years.
Another major decision of the Modi 2.0 government was to complete vaccination for Foot and Mouth Disease (FMD) and Brucellosis of livestock. ICAR had estimated that the country suffers a direct loss of Rs 20,000 crore due to the drop in milk production and draft power. The vaccination programme has been going on from FY04 and till 2016, it was fully funded by the Centre. In FY16, on the recommendation of the 14th Finance Commission, the Centre increased the share of states in the devolution of funds to 42 percent from 32 percent and the central funding was reduced to 60 percent from 100 percent.
This had an adverse impact on the vaccination programme and several cases of FMD have been reported in Maharashtra. The decision of the government to restore central funding to 100 percent will provide the required fillip to the vaccination programme. It will result in higher milk production. In 2018, the World Organisation for Animal Health conducted an evaluation of India’s veterinary services and flagged several shortcomings. If FMD vaccination programme has to succeed, the shortcomings have to be removed.
Moreover, it may provide better market access to Indian meat in China, the US and EU as they do not allow the import of buffalo meat from India. China takes Indian meat through Vietnam. If India is declared free of FMD, the export of buffalo meat can go up substantially and unit realisation from exports can also rise.
The announcement of a contributory pension scheme for small and marginal farmers is also a good decision. In the interim budget for FY20, Prime Minister Shram Yogi Mandhan Pension Yojana (PM-SYM) was announced for the workers of the unorganised sector.
So far, 30.36 lakh workers have been enrolled. On the ground, farming operations cannot be carried out without agricultural labour. Neither PM-Kisan nor the pension scheme has anything for them. Since their identification is difficult as compared to landholders, they are being neglected.
Investment in rural infrastructure is key to the revival of agriculture. If BJP’s promise to invest Rs 25 lakh crore is actually implemented, Indian agriculture can hope to not only provide employment but also make farming more profitable. It can also reduce wastage across the supply chain. Finding resources for this should be a top priority for the government. The government would also do well to cover agriculture labour in its welfare schemes.(The author is Visiting Senior Fellow ICRIER. He served the Government of India as Secretary, Agriculture. Views expressed are personal)