Finance Minister Arun Jaitley displayed a deft hand at the start of his budget presentation on Thursday by espousing the cause of the Indian farmer. Presenting the election year budget, the FM chose to start off the budget speech highlighting what his government will do for the farmers in its last lap.
Even as a slew of sops are announced for the farms sector, one thing that's conspicuously absent is any announcement of any more farm loan waivers.
"The budget is rightfully oriented towards Agriculture and rural areas given the rising number of farmer suicides," R Shobha, National Director for Project Management at Colliers International India said.
"Setting up of food parks and the thrust towards food processing and logistics seeks to address the nation's food surplus. Increased thrust on agricultural exports will also help boost the rural economy. Coupled with the focus on rural housing, these measures should take development to tier 3 cities and rural areas," she added.
This is a nimble-footed move to win the sector that employs more than 50 percent of Indian workforces. However, a quick fact check is important while trying to understand if grandiose promises translate into results.
The Economic Survey 2018 presented in parliament on Tuesday said India's agriculture sector is expected to grow 2.1 percent in the current year. The survey also said the government would take measures to double farmers' income by 2022.
However, the stark fact remains that promises don't usually translate into results. The Economic Survey 2017 had made even greater a promise -- that the agri sector would expand 4.1 percent. Obviously this didn't materialise.
So will the measures announced by the FM help in pulling out the vital agriculture sector from the rut it has stuck into over the years?
In the prelude to the announcements for the agri sector the finance minister said food production in the country has hit record levels. Years of bumper crops are nothing new but what's afflicted the farmers most is the chronic cycle of low returns that they are stuck with. When the crops exceed expectations, boosted by a good weather cycle, the prices fall. Likewise, when they end up having low produce to sell when prices are supported by an unfavourable weather cycle. Either way the farmers end up being indebted.
Here is a recap of what the Budget 2018 has offered for the agri sector:
MSP for khariff crops
The most important announcement is a higher Minimum Support Price (MSP) for agricultural produce. The budget says the MSP will be is 1.5 times the cost of production. However, it's not clear as yet how the government will raise the substantial funds needed to ensure high minimum support prices across farm sectors. Another downside of this drastic move, the experts have warned, is the impact on inflation in the short to medium term.
The higher MPS move by the government will have other positive implications if indeed there's a policy framework around it. If the government is indeed procuring agri produce at higher MSPs it will lead to a boost of warehousing in the country.
"The focus and boost for agriculture in Budget 2018 provides an opportunity for warehousing investment firms to invest in building warehousing/ cold storage facilities across our agricultural belts." says Joe Verghese, Managing Director at Colliers International India.
Boost in funds:
The finance minister has said the funds earmarked for loans to the farmers will be increased from 10 lakh crore to 11 lakh crore.
The finance minister says funds have been allocated for setting up 42 food parks for agri exports across the country. He said Agri exports have the potential to hit $100 billion over the years. The move to promote value addition in the farm sector, if executed properly, will augur well for the agri sector.
Food processing sector:
The government says it expects the food processing sector to expand 8 percent every year. The budget allocation for the sector this year has been doubled to 1400 crore.
Other budget promises for the farm sector:
-- Agricultural market fund of Rs 2,000 crore
-- Rs 500 crore for launching Operation Green
-- Apart from MSP, the government will develop system for ensuring optimal farm price realisation. Under the plan the existing 22,000 gramin agri centres will be boosted to help farmers in direct sales.