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Against the backdrop of recent farmers’ agitations in large parts of India and the BJP’s unexpectedly poor electoral performance in many states, it was expected that the NDA government would present a farmer-centric rural budget this time round.

The first reaction to the interim budget speech of the interim finance minister Piyush Goyal was that it was a farmer and middle-class oriented budget and may increase the disposable income in the hands of the rural population and the Indian middle class.

If one concentrates on the rural and agricultural sector, it is seen that the main announcement for them was a direct income support to farmers which is Rs. 6000 per year per farming family with up to two hectares of agricultural land. This money will be transferred in three instalments of Rs. 2000.

According to political commentators, the NDA government was under pressure to announce this scheme as Congress President Rahul Gandhi had already declared that a minimum income scheme for the poor would be assured if his party was voted to power in the 2019 parliamentary election.

How far is this helpful?    

To understand this issue, one should look at the present rural and agricultural sector of Indian economy. For the last few years, the rural sector has been in deep crisis. A big segment of the rural economy has been suffering from the composite impact of consecutive drought conditions for several years.

Public spending had been insufficient in regions that were affected by drought. Actually, rural investment in real terms was declining. The wage rate was not only stagnant but fell in real terms. The thrust of demonetisation and the subsequent implementation of GST brought the rural economy from bad to worse and a huge number of farmers in particular and the rural population in general, faced dire consequences. In that situation, the government did not even spend its budgeted amount for the rural sector. For example, as against the budgeted Rs. 9,975 crore for 2018-19, it has spent only Rs. 8,900 crore for the National Social Assistant Programme, the oldest and biggest income transfer scheme where the same amount of Rs. 200 per month is being given since 2006 to poor families. The expenditure on rural road and housing was similar and the underspent amounts were Rs. 3,500 crore and Rs. 1,100 crore, respectively. If one adds the total amount of underspending in the rural sector including the Swachh Bharat Mission, the Krishi Sanchai Yojna, which was to create rural infrastructure and income for the rural poor, the amount climbs to about Rs. 20,000 crore.

Coordination with state governments

Another problem is the trust deficit. In some cases, even the allocated money is not being properly utilised or does not reach the targeted section. The government’s policy is to target the supply side of agriculture. But economists like Ashoke Gulati think that demand side is a bigger problem for the farmers. The proper pricing of products is to be addressed as soon as possible. Now only a portion, not more than 25% of the agrarian community, can reap the benefits of the MSPs (minimum support prices). Quite a number of agricultural products are being sold in the open market at prices than are lesser than the MSP. In such a situation, the policy of MSP itself may be defeated. Gulati also pointed out recently that the Madhya Pradesh government’s cash transfer policy through Bhavantar Bhugtan Yojana has failed and that has been proved by the results of the recently held assembly elections. Some state governments, like Telangana and Odisha have done better in this regard with Rythu Bandhu and KALIA schemes respectively. The West Bengal government has recently announced a similar cash transfer policy following the Telangana model. Actually, there are many cash transfer or other benefit policies. The union government should have better coordination with the states and make a comprehensive plan for the benefit of the farmers and landless rural labourers. Otherwise, a lot of public money will be spent without having the desired results.

It is good news that the Budget has allocated a higher amount in MGNREGA. At present, allocation in food subsidies and MGNREGA has crossed Rs. 2.2 lakh crore. But much of it is misused. As a result, the main sufferers have been the rural poor and that can be checked with proper governance. In this regard, the budgeted schemes like cow protection and fisheries are new announcements. But it is doubtful how far these can be of use to ease farmers’ distress. It is true that the union government has to take the lead in funding a long term solution of rural stress. However, this programme cannot be successful unless states have equal participation.

Saugata Bhattacharyay, Professor of Economics at Viswa Bharati University and an agricultural economist, told BE that the government needs to implement an untargeted public distribution system. This will enhance the quantity of food procurement by the government. That may lead to increase in market prices of agricultural products. According to him, the present budget should have touched on that matter. He also stated that the government needs to spend more on rural and agricultural infrastructure.