Why the farm sector is in dire need of a push from the Union budget

Farmers are battered due to price dips and low incomes, despite a record harvest


Last year’s budget allocated more funds to mitigate weather-related risks by strengthening crop insurance and irrigation schemes. Photo: Hindustan Times
Last year’s budget allocated more funds to mitigate weather-related risks by strengthening crop insurance and irrigation schemes. Photo: Hindustan Times

New Delhi: After consecutive years of drought in 2014 and 2015, rural India was looking at a turnaround following the normal monsoon in 2016 but a bumper kharif harvest and the cash crunch following demonetisation of high-value currency notes took a toll on crop prices, especially for vegetables and pulses. Earlier this month the government estimated that agriculture growth will bounce back to 4.1% (in 2016-17) from the low 1.2% and a contraction of 0.2% in 2015 and 2014, respectively. However, this is yet to translate into higher income for farmers.

Last year’s budget allocated more funds to mitigate weather-related risks by strengthening crop insurance and irrigation schemes. Prime Minister Narendra Modi also launched an electronic trading platform (eNAM or electronic national agriculture market) for farmers to ensure remunerative prices. While the upcoming budget could see more allocation for these schemes, farmers across India require focused support to ensure some form of an income guarantee, more so as the government has set a target of doubling farm incomes by 2022.

Here are some key reasons why agriculture needs more attention in the 2017-18 budget that will be unveiled on 1 February.

• Higher prices of pulses and favourable rains prompted farmers to increase production of pulses. According to the first advance estimates put out by the agriculture ministry last September, production rose by a staggering 57% in 2016-17 compared to the year before, resulting in prices plunging below government announced support prices.

The budget could help farmers and also consumers who suffered rising prices in the recent past by putting in more funds by strengthening procurement of pulses.

• The cash crunch following demonetisation of high-value currency notes took a toll on perishable prices, be it onions, potatoes or tomatoes. Wholesale prices dipped 24% in November (on a year-on-year basis) and the fall was a steep 33% in December. While farmers are growing more horticulture crops- for the past few years horticulture production has exceeded foodgrains by volume- price risks are enormous. While tomatoes are selling for Rs 25 a kilogram in the national capital farmers in several states are dumping their produce by the roadside. The budget can possibly pitch in here: to ensure remunerative prices for small and marginal horticulture farmers who are outside the usual price support net available for rice and wheat.

• Another major concern is that between 2014 and 2015, suicides by farmers rose 42%, shows data released by the National Crime Records Bureau in December last year. An analysis of the report shows that indebtedness and crop failures drove farmers to take the extreme step, and 73% of them were small and marginal cultivators with less than 2 hectares of landholding . This means farmers are in dire need of debt restructuring or waiver schemes besides higher focus on insurance and irrigation to help them deal with deficit rains.

• Despite the uptick in farm activity following a normal monsoon and higher crop production, rural wages continue to be sticky affecting agricultural labourers. Last November nominal rural wages grew by 4.9% year on year. While this is higher than the 2.1% and 3% growth seen in past two years, the rise in nominal wages is way below the 33% and 17% growth seen is 2013 and 2012, respectively, implying real wages for agricultural labourers have been falling for three continuous years now.

The tepid growth in nominal wages, despite higher allocations for the employment guarantee scheme shows that farm labour needs targeted support from the upcoming budget to lift rural incomes and demand.

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