In the run up to the Budget, it was widely believed that the Interim Budget will have a rural focus and there may be a package for farmers.
The richer classes, mostly urban, have however received an unexpected bonanza.
In the budget speech, Finance Minister Piyush Goyal credited demonetisation for growth of 18 percent in direct tax collection in 2017-18. The tax base also increased by 1.06 crore people who filed income tax return for the first time in 2017-18. Ironically, these are the people who have benefited most from the Interim Budget for FY 2020 as individual tax payers earning up to Rs 5 lakh will get full tax rebate and will not be required to pay any income tax. Does it mean the gains of demonetisation have been surrendered? Also, this is not all. Income tax on notional rent on a second self-occupied house is also proposed to be waived. These people have every reason to be happy with the FM.
This is not to deny that rural and agriculture sectors have been completely ignored.
The announcement of direct income support to farmers was widely anticipated. The government has done well to provide a uniform grant of Rs 6000 per year to 12 crore small and marginal landholding farmer families. The revised estimates provide Rs 20,000 crore in this year’s budget itself. Though this is to be paid in three instalments, the government would like the first instalment to be paid into farmers accounts by March, before the parliament elections.
According to the All India Rural Financial Inclusion Survey 2016-17, conducted by Nabard, average monthly income of an agricultural household was Rs 6,668 in Uttar Pradesh and Rs 7,175 in Bihar. The direct income support of Rs 500 per month will not even raise their income by 10 percent. As for farmers in Punjab, their average monthly income in 2016-17 was Rs 23,133. Assistance of another Rs 500 per month would be too low and it will not compensate for deepening of tube-wells, which many of them undertake almost every third year due to the falling water table.
Since land records are not updated in most states and the state governments will have to collect their bank details and link it to their land holding details, it is likely that only a few states may actually deliver the money into bank accounts of landholders.
In an election year, no one expected the government to undertake major reforms of subsidies on fertiliser, irrigation or electricity. These reforms will involve unpopular decisions, at least in the short term and they would be easy to undertake in the first two years of a new government. So, it is no surprise that the government has not touched the reforms of agricultural subsidies.
It is good news that a government, seen to be obsessed with vegetarianism, has declared that a new department of fisheries will be set up. The sector employs about 1.45 crore people and it earned about $7 billion in exports in 2017-18. Inland fishery now produces about 68 percent of India’s fish and it can be a source of employment and income to rural people across India. The government has done well to recognise its potential to contribute to increasing farmers’ income. Interest subvention to fishermen at par with farmers on Kisan credit card should be helpful too.
To sum up, the budget acknowledges that the agriculture sector needs more aggressive support of the government. The new government would do well to understand that farm sector faces peculiar challenges in different regions of India and they need to be understood and tackled differently. For example, the farmers in Bihar do not face scarcity of water but there are no mandis in Bihar. Punjab farmers, on the other hand, have to invest every other year in deepening their tube wells though they have well developed mandi infrastructure.
The government invested huge amount of time in conceiving and implementing GST by consulting and negotiating with the states. In fact, the Centre and the states surrendered their right to change the rates of GST. Not only that, the government acknowledged the need to continuously fine tune and modify GST rules and rates as the situation demanded. Similar engagement with state governments on agriculture was, however, not seriously attempted by the government.
Similar effort for agriculture should be the first priority for the new government.
Siraj Hussain, a former Union agriculture secretary, is visiting senior fellow, ICRIER, New Delhi. Views are personal.
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