What did the budget do for agriculture?

The budget 2017-18 pitched for more reforms in agriculture marketing and increased funds for insurance and irrigation schemes, but did not spell out how farm incomes will double in five years


Arun Jaitley said funding for the rural and agriculture sector would be increased by 24% in fiscal 2017-18 to Rs1.87 trillion. Photo: Aniruddha Chowdhury/Mint.
Arun Jaitley said funding for the rural and agriculture sector would be increased by 24% in fiscal 2017-18 to Rs1.87 trillion. Photo: Aniruddha Chowdhury/Mint.

New Delhi: The Union budget on Wednesday gave a push to market reforms in agriculture, increased funding for crop insurance and set a higher target for farm credit, as the government moved to tackle distress in rural India.

The budget for 2017-18 also charged the apex rural bank, National Bank for Agriculture and Rural Development (NABARD), with implementing schemes to improve access to irrigation and develop the dairy sector.

“This year farmers have shown their resilience and agriculture growth is expected at 4.1%,” finance minister Arun Jaitley said in his budget speech.

To help farmers get better value for their produce, he said that a model law on contract farming will be circulated among states. Additionally, Jaitley reiterated the government’s earlier goal of bringing in more regulated agriculture markets on the electronic National Agriculture Market (e-NAM) platform.

The central government will urge state governments to delist perishables such as vegetables and fruits from Agriculture Produce Marketing Committees (APMCs) and allow farmers to sell such items directly to consumers to get a better price, Jaitley said. At present, farmers are required to sell such produce in markets managed by APMCs.

Overall, Jaitley said funding for the rural and agriculture sector would be increased by 24% in fiscal 2017-18 to Rs1.87 trillion.

The budget set a target for disbursing Rs10 trillion of farm credit in 2017-18, up from Rs9 trillion targeted last year. “We will ensure flow of credit to underserved areas,” the finance minister said, announcing special support of Rs1,900 crore to cooperative banks to bring them onto the core banking platform.

“This will ensure seamless flow of credit to small and marginal farmers who take credit from cooperative banks,” Jaitley said.

For the flagship crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY), the budget increased the allocation from Rs5,500 crore (budgeted estimate in 2016-17) to Rs9,000 crore in 2017-18. The target next year will be to bring 40% of cropped area under insurance and take it to 50% next year, Jaitley said.

The finance minister said that the government is likely to incur a cost of Rs13,240 crore for the PMFBY scheme in 2016-17 (revised estimate).

To improve access to irrigation, the budget provided an additional Rs20,000 crore for the long-term irrigation fund under NABARD. A similar amount was allocated last year while setting up the fund.

The budget also announced setting up of a dedicated micro-irrigation fund with a corpus of Rs5,000 crore under NABARD. Additionally, it announced the setting up of a dairy development fund under NABARD with a corpus of Rs8,000 crore.

On the soil health card scheme, the finance minister said mini labs for soil testing will be set up in all 648 Krishi Vigyan Kendras (farm research institutes) across India. These will be run by rural entrepreneurs who will be assisted by the government.

Despite highlighting the government’s goal of doubling farm incomes in five years, the finance minister did not spell out a clear strategy to achieve the target at a time when farm incomes have plunged due to lower crop prices.

The budget announcements come in the backdrop of falling farm incomes despite record production of rain-fed kharif crops in 2016-17 and a rebound in agriculture growth. Farm incomes were severely dented in the face of the cash crunch that followed the 8 November demonetisation of high-value currency. It led to a crash in the prices of vegetables and fruits. Wholesale prices of pulses have fallen below government-set support prices following a bumper harvest.

Following the normal monsoon in 2016, which followed two years of drought, the statistics department forecast a 4.1% growth in 2016-17. That’s a rebound from the dismal 1.2% increase in 2015-16, and a contraction of 0.2% in the year before.

Last year’s budget raised allocations for flagship schemes on crop insurance and irrigation to help farmers deal with weather risks like drought. The ministry of agriculture received funding of Rs44,486 crore in 2016-17.

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