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The agricultural sector, the cornerstone of the Indian economy, has faced a tough year. With unpredictable monsoon patterns, agricultural growth has decreased from 4.7 per cent last year to 1.4 per cent, exacerbating rural distress. Although its contribution to India's GDP has dropped to less than 15 per cent, the sector remains crucial for overall economic growth as it supports over 70 per cent of the population and accommodates about 70 per cent of the nation's poor.
Despite challenges such as drought, adverse weather, climate change and inflation, the agriculture sector is expected to grow by 6 per cent, in the 2024-25 fiscal year. This year’s Union Budget presents a crucial opportunity to address concerns of the sector and propel it towards its goal. The Union Budget for 2023-24 allocated Rs 1,25,035.79 crore to the Ministry of Agriculture and Farmers Welfare, which is about 5 per cent more than the revised estimates for 2022. This year’s focus is expected to boost technological integration, improve rural infrastructure and enhance sustainable farming practices.
Tackling Food Inflation and Enhancing Sustainable Farming Practices
While focusing on making farmers more resilient, the government must simultaneously help mitigate food inflation that disproportionately affects society's underprivileged segments. Food inflation has been exacerbated by stock restrictions on pulses, wheat, and rice, increasing the cost of food in India to 8.70 per cent in May of 2024 over the same month in the previous year. To control food inflation, the budget should focus on building an innovation ecosystem, introducing new crop protection and microbial products, and improving stagnant productivity.
The rising demand for biofuels due to environmental commitments necessitates that agriculture cater to food, feed and fuel needs. The government should prioritise R&D investments aligned with national priorities, focusing on climate-resilient crops and sustainable farming practices. The budget should incentivise R&D and support technology dissemination to farmers through private sector investment through income tax breaks for private sector investments.
Building a Robust Domestic Production System
Similarly, import dependence on pulses and oilseeds, coupled with the government's commitment to free rations under the Annapurna Yojana and climate change, necessitate a robust domestic production system. Supporting 80 crore people with free rations and aiming for USD 100 billion in agricultural exports by 2030 requires strategic decisions on crop areas - vegetables and food grains, increased pulse and oilseed production, and public-private sector technology integration to boost productivity and reduce imports. Budgetary support, public-private partnerships, and addressing procurement and processing inefficiencies are essential for achieving these goals.
Farmer Schemes and Policy Stance
The Kisan Samruddhi Yojana should be strengthened to empower farmers with greater financial support and its utilisation should be linked to the use of advanced agricultural inputs. This will ensure timely access to essential and modern resources and subsequent financial support to the farmers. Strengthening access to credit for long-term loans, minimising wastage through improved storage and upgraded warehouses, and supporting farmers via Farmer Producer Organisations (FPOs) and cooperative models are all crucial measures. The budget should have adequate resources for capacity-building initiatives and should incentivise the investments by private companies to train farmer groups, particularly women, creating awareness and adoption of modern and sustainable farming practices. Given water scarcity, micro-irrigation incentives through budgetary support and schemes like Kisan Samruddhi Yojana are vital, as is the promotion and adoption of precision agriculture.
Extending the Production Linked Incentive (PLI) schemes for the production and export of the latest innovation in crop protection chemicals in India will provide a long-term dividend to India. Granting these on generics will have only a limited dividend. Furthermore, GST on agricultural inputs, such as agrochemicals, should be brought under the rationalised GST rate of a maximum of 12 per cent to ease the financial burden on farmers. May be pertinent to note that fertilisers are taxed at 5 per cent whereas seeds have a nil tax rate. The government has already referred fertiliser GST to a group of ministers; similarly, GST on agricultural inputs should also be standardised to avoid counterproductive taxation.
Boosting Technology Adoption and Rural Employment
Aligned with making India a Global Drone Hub, expanding the PLI scheme for agri-drone component manufacturing is crucial. Incentivising drone-based agricultural mechanisation, with private companies assisting self-help groups, will ensure successful technology adoption. Agricultural services rendered to farmers, such as precision agriculture and application services, should also be incentivised. Increasing annual disbursements to eligible farmers from Rs 6,000 to Rs 8,000 via coupons for advanced agricultural inputs purchase can further enhance technology adoption and productivity.
Finally, incentivising the corporate sector to employ rural youth is important in addressing the significant employment issue in rural areas. Innovative methods must be found to encourage corporations to generate grassroots employment, ensuring that the benefits reach the local population and contribute to overall rural development.
India stands at a critical juncture where decisive actions in the agricultural sector can reshape its future. By prioritising innovation, sustainable practices, and technological integration, the government can bolster food security, enhance rural incomes, and mitigate climate impact. The upcoming budget must not only address immediate challenges such as food inflation and import dependence but also lay the foundation for long-term resilience and growth. With strategic planning and concerted efforts, India can emerge as a global leader in agriculture, ensuring prosperity for its farmers and food security for its population.
