Agriculture and Budget: Immediate compulsions and long-term vision
Much of the outlay towards the agriculture (and allied) sector continues to remain skewed towards meeting the MSP-related spend at about ₹2.36 lakh crore.
Nevertheless, there is a budgetary thrust on transforming agricultural research, and on the release of new high-yielding and climate-resilient varieties of field and horticulture crops for cultivation by farmers.
The government realises that support by way of MSP is not sustainable in the long-run and increase in yield as well as drought resistant varieties are the means to provide adequate returns to farmers for their toil.
Atmanirbharta and self-reliance in essential oil seeds ranging from mustard, groundnut to soyabean has also received emphasis in the budget.
The importance of promoting horticulture farming to enhance farmer livelihoods is also apparent in the budget, as is the role of FPOs and co-operatives in this context also to facilitate collection, storage, and marketing.
Farmer networks’ role
Implicit, is the role of such farmer networks in addressing two critical gaps in the country’s agri-ecosystem, namely, that of provision of quality inputs to farmers, along with necessary extension services in terms of crop as well as animal husbandry advisory.
Furthermore, the demonstrated competitiveness and revealed comparative and competitive advantage in the fishery sector is to be further harnessed by support initiatives for high value export-oriented shrimp farming.
Importantly, the Digital Public Infrastructure (DPI) is also to be expanded with digital crop surveys across 400 districts. The focus on development and expanding coverage of digitisation in agriculture as well as sustainable agriculture practices (through promotion of natural farming) is also quite appropriate.
Budgetary allocation to the sector has increased from ₹1.22 lakh crore in Budget 2023-24 to ₹1.52 lakh crore in Budget 2024-25. This is excluding the MSP outlay as well as subsidies on fertilisers.
Agriculture and allied activities contribute to the livelihood of over 50 per cent of the populace and employ over 44 per cent of the manpower force, however, the sector’s contribution to GVA at $535.38 billion has been barely 18.2 per cent in 2022-23.
India is a world leader in the production of several food crops and horticulture produce and in animal husbandry. However, even in such commodities, the country’s share in world trade is marginal at barely $53.1 Billion or 6.84 per cent of total exports of $776 billion.
Productivity and yield in the country in most value-chains are not on par with comparator economies. In this context, overall, the budget pro-actively addresses several constraints in the agri-ecosystem.
Furthermore, in a related intervention, 50 multi-product food irradiation and safety units are to be established. Rising non-tariff barriers ascribed to food quality is of growing concern, and this budgetary initiative is most significant in this perspective.
Notably, 100 quality and safety labs with NABL accreditation are also to be established. Budgetary Outlays are skewed towards credit access, farmer mechanisation, value-addition, and integration.
The outlays under some critical schemes and programmes have been relatively stagnant vis-à-vis Budget 2023-24. Nevertheless, credit, farm mechanisation and value-adding facilities have been accorded priority.
This is reflected in the significant increase in the outlays under the MISS and the RKVY schemes.With shrimp production accounting for 2/3rd of exports of ₹60,000 crore of seafood, the sub-sector is to be supported by reduction in basic customs duty.
This is most appropriate and will reflect thrust on promoting most potential value chains.
Lack of competitiveness
Presently, there is (at least seasonal) lack of competitiveness in several national commodity value-chains, as reflected by custom duty barriers.
In this context, the government’s initiatives towards productivity increases is most laudable. Large scale clusters supported by FPOs and Co-operatives to develop vegetable supply chains is envisaged.
In this context, it is necessary to understand that a critical gap in the FPO ecosystem in terms of limited competent service providers for involved in formation and promotion of FPOs need be addressed through intensive training on best practices in FPO promotion.
There remain many asks, which could perhaps be taken up by the government in future. For example, market intelligence needs to be provided, along with planned and monitored production.
A national and global market intelligence system and platform should be created, particularly because, often supply and demand in many other countries also influences prices in India.
Overall, however, the budget has been most appropriately conceived meeting short-term expectations of stakeholders, even while retaining a long-term vision of realising global competitiveness across value chains.
(The authors are Partners, Grant Thornton Bharat)