Budget
What the Budget can do to support farming, in five charts
Summary
Even as it presses for market reforms in agriculture, the Centre has been actively using the basket of schemes wholly funded by it to widen the social security net for farmers. Expect that to continue in the coming Budget
In 2016, the BJP-led government set itself the target to double farmers’ incomes by 2022. An inter-ministerial committee set up to recommend strategies to meet this target highlighted seven sources of income growth, mostly revolving around better cropping practices and a shift to non-farm occupations. In time, the Centre buttressed this with schemes targeting key dimensions of farming—income, insurance and lending.
Three such schemes accounted for 82% of central budgetary allocations to the ministry of agriculture and farmers' welfare in 2021-22, against 18% in 2018-19: cash transfer scheme PM-KISAN (Pradhan Mantri Kisan Samman Nidhi), PMFBY (Pradhan Mantri Fasal Bima Yojana), a crop and yield insurance scheme, and interest subsidies on short-term credit to farmers. Between 2018-19 and 2021-22, the combined allocations of the three schemes have increased 3.3 times, largely due to PM-KISAN. Given their importance in the farming matrix, and political import, their primacy in budgetary support to agriculture is likely to continue when the Budget 2022 is presented on 1 February.
Data on how these schemes have benefited farmers is not available. The latest available estimates of farmer incomes is for 2018-19, and it points to stress in agriculture. Between 2012-13 and 2018-19, average monthly income of farm households increased from ₹6,426 to ₹10,281—a compounded annual growth of 8.2%. Disaggregated data shows that the compounded increase in income accruing from cultivation was just 3.5%. This indicates that cultivation is becoming less remunerative for farm households, and they are increasingly seeking wage employment elsewhere.
Income Boost
Announced in the lead-up to the 2019 national elections, PM-KISAN assures a cash transfer of ₹6,000 annually to about 120 million small and marginal farmers. Its transfer, made in three equal instalments, works out to an additional income of about 5% on the last surveyed average of ₹10,281 in 2018-19. This scheme, which costs the Centre around ₹65,000 crore annually, has seen a steady increase in disbursement of payments.
As of November 2021, there were about 124 million farming households eligible for income transfer of ₹6,000 annually. These are small and marginal landholders who own less than 2 hectares of land, and account for about 85% of total land holdings. The beneficiaries’ list has been drawn up based on the most recent Agriculture Census, done in 2015-16. As of November 2021, the most recent round of payments, 109 million farmers, or roughly 88% of the total farmers registered, received the payment.
Crop Cover
Similarly, the PMFBY crop insurance scheme has seen a steady increase in applications for cover as well as for claims. Under PMFBY, the premium to be paid by farmers is fixed at 1.5% of the sum insured for rabi crops and 2% for kharif crops, and at 5% for cash crops. The balance premium is split equally between the Centre and states.
In 2019-20, 61.3 million applications for crop insurance were issued. Of this, insurance claims were paid out for 22.3 million, or about 36% of all applications. However, the PMFBY scheme has been beset by various issues, with farmers complaining about non-payment of claims and several states opting out due to the high premium burden.
But increasing budgetary outlays is unlikely to solve the underlying issues, which are mostly operational. This requires the cooperation of the Centre, states and private insurers, many of which lack operational infrastructure in rural areas.
Research Focus
While the above targeted schemes are undoubtedly beneficial for farmers, investments in agricultural research and education are also indispensable to ensure the longer-term sustainability of Indian agriculture. This includes expenditure on services that educate farmers on best agricultural practices (agricultural extension), and research on crop science and climate-resilient farming.
Expenditure for these is routed through the department of agricultural research and education, under the ministry of agriculture and farmers welfare. It also includes expenditure on agricultural universities and research institutes. However, since 2017-18, expenditure under these heads has increased at a modest 5.2%, which pales in comparison to allocation under more populist schemes.
For now, the focus of the Union budget on agriculture remains through the prism of central sector schemes. In next month’s budget, this is expected to continue.
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