Newly elected Finance Minister Nirmala Sitharaman is all set to present her maiden Union Budget on July 5. Printing of Budget 2019 documents have already begun after the symbolic 'Halwa' ceremony. With just five days remaining when Sitharaman will read out the Union Budget 2019 in Parliament, there are lots hope that the government may announce something big for the country’s crisis hit agriculture sector.
Agriculture accounts for one in every two jobs in India and contributes nearly 16 per cent in the country’s overall GDP. During the 2019 Lok Sabha election campaign and even before that, Prime Minister Narendra Modi had promised to double the farmer’s income by 2022.
However, the current situation makes it highly unlikely that the government may achieve the target in the given time. In the last five years, the agriculture sector grew at 3.66 per cent, which is not even half of the overall GDP which was 7.43 per cent. To make it even worse, the agriculture growth in 2018-19 dipped to 2.9 per cent.
In order to achieve PM Modi’s oft-repeated goal of doubling farmers’ income, the Union Budget 2019 may see a plethora of measures for the country’s farmers. According to Ecowrap - a research report by the State Bank of India (SBI) - the government needs to provide an incentive to agri term loans for investment purpose in the Budget 2019.
“The objective of doubling farm income by 2022 can be achieved by providing an incentive to agri term loans for investment purpose through an enabling mechanism of either interest subvention or a credit guarantee fund,” it said.
In the interim Budget before the elections, the Modi government had announced Rs 500 per month or Rs 6,000/yearly income support to select farmers. In their election manifesto, they promised to increase the scheme criteria to all the farmers. The government now needs to increase the income support from Rs 6,000 to Rs 8,000 over the next five years. SBI believes it will work as a feel good factor and boost consumer sentiments.
As per the calculation done by the report, if the income support is progressively increased from, say, Rs 6,000 to Rs 8,000 in the terminal year and reduce the fiscal deficit to 3 per cent in 2024, the additional cost for 14-crore farmers over the baseline estimates could be Rs 12,000 crore per annum, same as the revised estimates if only Rs 6,000 was provided to all 14 crore during the next five years.
The Narendra Modi government during its first tenure had launched a crop insurance scheme - Pradhan Mantri Fasal Bima Yojana (PMFBY). As of now, the scheme covers only three types of crops-food crops, oilseeds, annual commercial/horticulture crops, which is only 30 per cent of the total crop loans given by banks.
The SBI report says that the government should cover all types of crops under the scheme which will also help banks to manage the risks. The government also needs to develop an efficient global value chain system and liberalise land lease markets across the country, which will eventually increase contract farming on medium and long-term basis.