It was well-known that Budget 2020 will not be easy to formulate. The consumer economy has been in the doldrums for about two years now. Sale of vehicles, domestic air traffic and broadband subscriber base are below a five-year average trend of growth. With contraction in core infrastructure industries and non-food bank credit, the stress in the economy, especially in the agriculture and rural sector, demanded real action, rather than poetry.
Finance Minister Nirmala Sitharaman, at her eloquent best, devoted quite some space to agriculture and rural sector in her budget speech. In Modi 2.0, the ministries of agriculture and rural development have a common minister. This effort of convergence was reflected in the budget speech and Sitharaman came up with a joint point agenda for the agri-rural sector.
The economic survey presented On January 31 provided a short-lived hope that finally the long-pending reform of procurement and distribution of foodgrains will be taken up — that was not to be.
However, from a long speech of two hours and 43 minute and two pages still unread, there are three important leads for agri-rural sector.
First, the government has not increased the outlays, but it has done well to take note of water crisis engulfing several parts, including districts which brought green revolution to India. She mentioned that comprehensive measures will be taken in these 100 districts.
Though the details cannot be expected in the budget speech, one hopes that in paddy-growing districts of Punjab, Haryana and West Uttar Pradesh, there will be a real financial incentive to farmers for diversification from paddy. Any strategy towards diversification must include lower procurement of paddy at MSP and payment of compensation to farmers for loss of income due to migration to a crop requiring less water. Similarly, the recent rise in domestic and global price of sugar may persuade farmers to further expand area under sugarcane, even in seriously water-stressed districts of Maharashtra, Karnataka and Tamil Nadu.
So far, the PM Kisan has been used for paying Rs 6,000 to all land holders. The real worth of the direct benefit transfer (DBT) will be tested if and when the DBT and PM Kisan are used to compensate farmers diversifying from water-guzzling crops to sustainable crops.
Second, the FM announced that the government will encourage a balanced use of fertilisers. India provides a huge subsidy on urea. Retail price of urea was just $76 per tonne in October 2018 and about 75 per cent of the cost of production is being paid by central government as subsidy.
In Bangladesh, retail price of urea was $192, while in Nepal it was $224 per tonne. In China, the retail price is $312 per tonne. The budget speech did not provide any roadmap for reducing subsidy on retail price urea, by paying farmers directly through the DBT. Similarly, nothing was mentioned about the identification of tenant farmers who also need to be covered in any DBT of fertiliser subsidy. As long as urea continues to be so highly-subsidised, balanced use of fertiliser can only remain a dream.
Third, the FM did well to emphasise the elimination of foot-and-mouth disease (FMD) among cattle and buffaloes, as a priority. Successful immunisation can increase production of milk and meat. Till FY 2016, this was totally funded by the Centre. Now the states have to share 40 per cent of the cost of immunisation. The FM would have done well to provide for entire expenditure for FMD.
For the agriculture and rural sector, Budget 2020 is not the most important event of the year. Reform of agriculture marketing, for example, is not really related to the budget. This year, the FM did not have much financial elbow room. So, reforms not requiring budget outlays deserve higher priority during 2020-21.Siraj Hussain, former Union agriculture secretary, is Visiting Senior Fellow, ICRIER. Views are personal.