Arun Jaitley likely to cultivate farmers with budget sops
Concessional loan scheme for farmers may be extended to offset demonetisation impact
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New Delhi: Finance minister Arun Jaitley may announce several measures to revamp farm infrastructure and support farmers as the National Democratic Alliance government seeks to win over this politically important section of society before crucial state elections next month, a top official familiar with the matter said.
The measures may include continuing with a scheme to give concessional loans to farmers, incentives for states to computerize primary agricultural credit societies (PACSs) and higher allocations to the National Bank for Agriculture and Rural Development, the official said, requesting anonymity.
The measures are likely to provide relief to farmers, especially those engaged in floriculture and the cultivation of vegetables and plantations, who have had to face disruptions in the supply chain and depressed prices for their produce following Prime Minister Narendra Modi’s 8 November surprise announcement to withdraw high-value banknotes.
The cancellation of currency notes with effect from 9 November led to a severe cash shortage, especially in rural areas. In his New Year’s eve address, Modi announced measures for farmers including smoother access to loans from cooperative societies, providing RuPay debit cards to 30 million people holding Kisan credit cards and an interest waiver for two months for those who had taken loans for their rabi crops from district cooperative banks.
“Public investment has to be stepped up. Long-term irrigation fund has been set up last year. The investment is required not only for creation of structures or completion of irrigation projects but should also focus on irrigation efficiency,” said the official cited earlier, who declined to be named. The government had last year announced a long-term irrigation fund with a Rs20,000 crore corpus.
Although all district cooperative societies are computerized, PACSs, which form the lowest tier, are still to go online, the official said. “Ideally, it should be taken care of by state governments but probably some kind of incentives needs to be given,” he said.
The scheme for concessional crop loans is likely to continue this year as well. The government had allocated Rs15,000 crore for the year ending 31 March for providing crop loans at subsidized interest rates and is expected to allocate at least a similar amount or higher for the next fiscal year.
Under this so-called interest subvention scheme, banks extend loans up to Rs3 lakh to farmers at a concessional interest rate of 7%. The farmers get a further 3-percentage point discount for timely repayment, making the effective interest rate 4%.
The sops for the farmers in the Union budget to be presented on 1 February will come weeks before crucial state elections in Uttar Pradesh, Punjab, Goa, Uttarakhand and Manipur.
“From a consumption-driven story, India’s growth narrative has suddenly changed with the demonetization exercise,” Indranil Pan, chief economist at IDFC Bank, said in a 20 January note. “Anecdotal evidence shows that consumption and production has been hit sharply, especially in sectors that have been heavily reliant on cash.”
Earlier this month, the government estimated that farm growth will quicken to 4.1% in 2016-17, compared with 1.2% in 2015-16 and a contraction of 0.2% in 2014-15. To be sure, the growth estimates do not factor in the impact of the note ban on agriculture.