india

Updated: Jun 20, 2019 06:57 IST

The central government has targeted spending Rs 25 lakh crore on the rural and farm economy over the next five years, which will reflect in allocations to be made in these sectors in the annual Budget on July 5, an official said, requesting anonymity.

Ahead of the Budget’s preparation, departments and ministries had been asked to present monthly, yearly and full five-year targets, following a similar exercise to draw up the agenda for the first 100 days of the new government, a second official said.

These agenda-setting exercises are going to “inform the Budget-making exercise”, the second official added, also requesting anonymity.

The Budget is expected to push farm and non-farm rural infrastructure and, within agriculture, it is likely to focus on removing bottlenecks in farm supply chains to enable freer trade in farm commodities so that farmers earn better prices.

“We could see incentives for technology providers in the farm sector to bridge the gap between farmers and markets,” the first official said.

Finance minister Nirmala Sitharaman, who recently held a pre-budget consultation on the farm economy, told participants that “concerns” of the agriculture sector were a priority. Signalling the focus on agricultural markets, she also talked about going beyond traditional tools and promoting start-ups to remove “fragmentation in agriculture markets” so that farmers get profitable rates for their produce, a participant said, requesting anonymity. The pre-Budget meeting on agriculture last week was attended by nearly 50 top officials and invitees.

In the previous term of the Modi government, farmers’ earnings had been hit by low agricultural prices, leading to farm-loan waivers by several states.

“Policymakers need to transition from a subsidy-led regime to an investment-led one in agriculture. It remains to be seen how far the government can go,” said economist Uma Kapila, the author of Indian Economy Since Independence.

NITI Aayog, the state-run think-tank, has already signalled harnessing artificial intelligence, machine learning, blockchain technology and big-data analytics for better information on commodity price movements. “There could be incentives to promote such technologies in these areas,” according to one of the officials cited above.

A key thrust area for the Budget will be the so-called “allied sectors”, which include food processing, fisheries, warehousing and irrigation.

The previous National Democratic Alliance (NDA) government completed work on 31 long-pending irrigation projects under the Pradhan Mantri Krishi Sinchai Yojana. However, work on 68 projects is yet to be completed.

Nearly 60% of the country’s net sown area doesn’t have irrigation cover, making the farm sector vulnerable to drought when rainfall is deficient.

Economists say the broader malaise in Indian agriculture has to do with too many subsidies but too little growth-propelling public investment. Despite India’s agriculture being heavily subsidized, a landmark ICRIER-OECD (Indian Council for Research on International Economic Relations-Organisation for Economic Cooperation and Development) study last year led by economist Ashok Gulati found that farmers suffered “negative market price support”.